2023 (2) TMI 509

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....income on 01.11.2017 declaring total income at Rs.3,63,990/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served. After hearing the assessee, the ld. Assessing Officer has passed an assessment order under section 143(3) of the Income Tax Act. One of the additions made by the ld. Assessing Officer relates to undisclosed sundry debtors. He recorded the following finding:- "Undisclosed sundry debtors:- As per the statement filed by the assessee to the Bank, it had Sundry Debtors of Rs.2,33,15.660/-. However, as per the Audit Report, its Sundry Debtors was only Rs,74,59,224/- as on 31.03.2017. Thus there was a prima facie excess of Sundry Debtor is of Rs.1,58,56,436/- - The undisclosed sales of Rs.1, 30,55,022/-(Stock Rs. 1,23,41,673/- + Plus Profit Rs. 7,13,349/-.to be included), is assumed to be part of excess Sundry Debtors reported by the assessee to the Bank (Giving benefit of doubt to assessee) Thus the excess Sundry Debtors of Rs. 1, 30,55,022/- only is treated as explained, against undisclosed sales. However, remaining unexplained Sundry Debtors of Rs.1,02,60,638/- (2,33,15,660 - 1,30,55,022) is treated....

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.... matter of rate of taxes is not available in the assessment order and, therefore, ld. Commissioner has rightly invoked the jurisdiction. 10. We have duly considered the contentions of ld. A.R. and gone through the record carefully. Before we embark upon an enquiry on the facts and issues agitated before us to find out whether the action u/s 263 of the Act, deserves to be taken against the assessee or not, it is pertinent to take note of this section. It reads as under:- "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order p....

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....rned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set asid....

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....ing the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 12. Apart from the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto reported in 227 CTR 113 and Gee Vee Enterprises Ltd vs. Addl. Commissioner of Income Tax (99 ITR 375). In the case of Sun Beam Auto, the Hon'ble High Court has pointed out a distinction between lack of inquiry and inadequate inquiry. If there is a lack of enquiry, then the assessment order can be branded as erroneous. The following observations of the Hon'ble Delhi High Court are worth to note: "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the In....

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....er is not only on adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but called for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry... It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would made such an inquiry prudent that the word 'erroneous' in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 14. In the light of above, let us examine the facts of the present case. A perusal of sub-clause (c) of section 263 would indicate that it puts an embargo on the power of ld. Commissioner under section 263 on the items for which an appeal is pending before the ld. CIT(Appeals). The simple reason for such embargo is that there should not be contradictory orders at the level of identical authorities. The ld. CIT(Appeals) has co-terminus power of t....

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....ule 37),sub rule (2),clause(i) is fulfilled. In view of above and on the facts and circumstances of the case, we pray for quashing of the proceeding". 16. It is to be appreciated that this aspect has been considered by the ld. Assessing Officer before allowing the credit. There is no apparent error in the order of the ld. Assessing Officer on this point. Therefore, we are of the view that ld. Commissioner has erred in invoking jurisdiction under section 263 of the Income Tax Act. 17. In view of the above, the appeal of the assessee is allowed and order passed under section 263 is quashed. 18. In the result , the appeal of the assessee is allowed . Order pronounced in the open Court on 13t h January , 2023 . ============= Document 1 INCOME TAX DEPARTMENT GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX PCIT, Asansol To, MONIKA MONDAL A/11, J.P.AVENUE ZONAL CENTRE DURGAPUR, BURDWAN 713211, West Bengal India PAN/TAN: AIHPM6528N DIN & Notice No : AY: 2017-18 ITBA/REV/F/REV1/2021- 22/1039272485(1) Dated: 01/02/2022 NOTICE FOR THE HEARIN....