TaxTMI 
TaxTMI 
2022 (11) TMI 1560
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....r Assessment Year 2010-11 u/s 139(1) on 12.10.2010 declaring income of Rs. 8,82,580/-. Assessment was completed u/s 143(3) on 24.11.2012 at a total income of Rs. 9,67,800/-. The ld. Authority believed that the ld. AO had not called for complete detail information in respect of following:- i. The difference in closing stock as per statement of bank and has shown in audited balance sheet. ii. Excess claim of liability in respect of creditor. iii. Difference in sundry creditors declared by assessee and declared to bank. iv. Difference in purchase reflected in the ledger account of M/s. Shiv Shankar Enterprises and the party-wise details of purchase filed by the assessee. v. Lack of evidence regarding, identity, creditworthiness of the creditors and genuineness of the certain transactions of unsecured loan. 3. Accordingly, considering the lack of enquiry leading to passing of assessment order which is erroneous and prejudicial to the interest of revenue, a show cause notice dated 11/12.02.2015 was issued and after taking in account the response of the assessee ld. Revisionary Authority was of the view that there has been non applicati....
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....tice. 10. That in any view of the matter and in any case, the order passed u/s 263 by Ld. Pr. CIT is bad in law and against the facts of the case, in as much as no adequate opportunity of hearing was granted and framing the impugned order without considering the principles of natural justice. 11. That having regard to facts & circumstances of the case, Ld. CIT has erred in law and on facts in passing the impugned order u/s 263 which is barred by limitation, illegal, without jurisdiction and contrary to law and facts and deserves to be quashed." 5. Heard and perused the record. 6. In regard to exercise of revisionary jurisdiction by the ld. Revisionary Authority the crux of argument of ld. AR was that audit objections was the only basis for exercising powers and that the settled proposition of law is that the powers cannot be exercised on the basis of audit objection. The ld. AR specifically referred to section 263 of the Act and submitted that the use of old "record" in section 263, implies the assessment record and any extraneous record or information cannot be used for invoking powers of section 263 of the Act. In this context he specifically relied on the....
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....t is important and relevant is the fact that except for the queries raised by the audit, the ld. Revisional authority has not gone into any other aspect of the assessment order. Only those heads of queries as raised by the audit party have been considered to be valid grounds to conclude that the assessment order was erroneous and prejudicial to the interest of revenue. The ld. authority has merely taken into consideration audit objection and the response of the assessee on the show cause notice to give a finding in the manner as if the audit objections have been sustained. 9. Although the order of the revisionary authority mentions that the assessment record in the case for the above noted assessment years were called for examination. It nowhere mentions that the audit objection were part of the assessment record. Thus matter extraneous to the assessment record has been considered. Which certainly is not the mandate of Section 263 of the Act. The order of Ld. Revisional authority would have had a more sustainable taste and tenor had it reflected in its order that primary information was the audit objection but for the purpose of section 263, the Ld. had applied its mind independ....
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....pply his mind to the facts of the case taking into account the objection raised by the internal audit. Such a consideration would not be contrary to the spirit of the scheme of the Act and the powers of the CIT under Section 263. The learned D.R. has cited the decision of the Supreme Court in the case of Kasturbhai Lalbhai (supra) which as rightly pointed by Shri Ganeshan has been overruled by the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. In any case that decision is inapplicable to the facts of this case. We are not called upon to decide as to whether the audit objection shall constitute information for the purposes of re-opening of an assessment under Section 147 as was the issue before the Supreme Court in the aforementioned case. The issue before us is limited as to whether the Commissioner of Income-tax would be justified in taking action under Section 263 when the matter is brought to his notice by the internal audit. In our view, the internal audit being a machinery under the administrative control of the CIT for the purposes of pointing out the acts of omissions, errors and prejudices caused to the revenue, they ar....