Lack of significant discussion of every argument by ITAT not substantial question of law

Lack of significant discussion of every argument by ITAT does not constitute a substantial question of law – High Court upheld revision u/s 263

ABCAUS Case Law Citation:
ABCAUS 3092 (2019) (07) HC

The assessee had appealed under Section 260A of the Income Tax Act, 1961 (the Act) alleging that the ITAT fell into error in not interfering with the order u/s 263 of the Commissioner, who had invoked powers and directed examination of accounts and returns of the assessee for the relevant Assessment Year.

The assessee was dealing inter-alia in commodities and is trading in agricultural produce and for that purpose held stock. His return were selected for scrutiny, pursuant to which, a notice under Section 143(2) and 142(1) was issued.

The AO required the assessee to produce materials in support of its claims. Subsequently the AO issued questionnaire, which was answered by the assessee. After considering the record, the returns were scrutinized under Section 143(3) of the Act.

One of the significant points considered in the assessment was low rate of profit margin declared by the assessee as against increase in total turnover. The assessee explained this apparent anomaly by stating that it incurred expenditure in respect of opening new branches. The assessee also produced its trading account during the course of assessment.

Subsequently, a show-cause notice was issued by the Commissioner under Section 263 of the Act proposing to revise the assessment order as the CIT was of the prima facie opinion that the assessment order was erroneous and prejudicial to the interests of revenue.

The assessee resisted this notice and contended that all relevant materials had been produced and were in fact taken into account by the AO.

However, the Commissioner passed the revisional order u/s 263 setting aside the original assessment order and directing fresh examination of various issues including the four points.

The assessee feeling aggrieved approached the Income Tax Appellate Tribunal and by the impugned order the ITAT had rejected the appeal.

Before the Hon’ble High Court, the assessee contended that the ITAT fell into error in not noticing the contentions urged and even in recording the assessee’s submission on merits. It was submitted that both the revisional order and the impugned order were erroneous inasmuch as they proceed on assumptions.

It was argued furthermore that there was a legal compulsion to record every contention made, notice and summarize every document produced in relation to any return to show that the issue had received consideration and due application of mind. Even a single line inferring the reason was sufficient. It was submitted, therefore, the revisional order could not be sustained.

The Hon’ble High Court observed that the Assessing Officer, it was apparent did not dealt with the issue expressly at all. The Commissioner had noticed that the assessee’s claim was facially not even gone into, the assessment record did not suggest that the issue of shortage was even raised by the AO or the same was explained by the assessee.

The Hon’ble High Court opined that in view of the reasons specifically recorded by the CIT (Appeals), the directions issued under Section 263 of the Act were warranted.

The Hon’ble High Court also opined that the lack of significant discussion of every argument by the ITAT does not constitute a substantial question of law.

The appeal was accordingly dismissed

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