Revision us 263 set aside as CIT did not do homework. No record was called for examining the issue or application of mind by CIT – ITAT
ABCAUS Case Law Citation:
ABCAUS 1226 (2017) (04) ITAT
The appellant assessee was aggrieved by the order passed by the Principal Commissioner of Income Tax u/s 263 of the Income Tax Act, 1961 (‘the Act’) requiring the Assessing Officer (‘the AO’) to examine afresh the expenses
Assessment Year : 2011-12
Date/Month of Pronouncement: April, 2017
Brief Facts of the Case:
The assessee was a limited company having four units at multi location across States. For the relevant year the assessee filed its return of income claiming deduction u/s 80IC of the Act.The AO completed the assessment by disallowing certain sums and allowing deduction u/s 80IC by order passed u/s 143(3) of the Act.
However, by a subsequent order dated the Pr. CIT recorded a finding that very less profit was shown for three units of the assessee which were not eligible for deductions u/s 80IC, whereas huge net profit was disclosed for one unit at Uttranchal where the firm enjoys the deduction u/s 80IC at 100%, as such the order passed by the AO u/s 143(3) of the Act was erroneous in so far as it is prejudicial to the interest of the Revenue, and on this premise required the AO to examine afresh the expenses debited to all the four units and also expenses pertaining to sales and job work.
Contentions of the appellant assessee:
It was contended that contending that the CIT erred in invoking Section 263 of the Act in as much as the aspect of deduction u/s 80IC was already subject matter of an appeal u/s 246A of the Act and also that there was no reason for the Pr. CIT to hold that the order of assessment was erroneous and prejudice to the interest of Revenue.
It was also contended that the AO had considered the facts in depth with reference to the books of accounts maintained by the assessee in respect of the four units and disallowed a sum of Rs. 68,84,141/- out of Rs. 74,04,479/- which was claimed by the assessee, and this fact itself established that the AO had examined the issue in depth as such the CIT was not justified in invoking the jurisdiction u/s 263 of the Act.
Further, it was argued that the certified copy of the office noting giving rise to the proceedings u/s 263 of the Act clearly showed that no record was called for, for examination of the issue by the Pr. CIT and for want of application of mind the proceedings are bad.
Observations made by the Tribunal:
The Tribunal observed that the AO had considered the aspect of income from job work and sales, and out of an amount of Rs. 74,04,479/- claimed by the assessee u/s 80IC he had disallowed a sum of Rs. 68,84,141/- while allowing only a sum of Rs. 5,20,338/- u/s 80IC. Thus by no stretch of imagination it could be said that there was no requisite enquiry by the AO. At best it was the case of inadequate enquiry.
Also the ITAT noted that as per the certified copy of the office noting, immediately on receipt of the proposal u/s 263 of the Act from DCIT noticing certain discrepancies in the completion of assessment u/s 143(3) of the Act, show cause notice fixing the date of hearing was ordered just after one week from the date of the assessment order. This clearly showed that on receipt of proposal no exercise of calling from record and examining the issue in detail to reach the satisfaction that there is escapement of income in the assessment framed by the AO as such the order of the AO was erroneous in so far as it was prejudicial to the interest of the Revenue. This clearly indicated want of due exercise for reaching a satisfaction as such the initiation of proceedings u/s 263 of the Act did not appear to be on any sound basis.
The impugned order u/s 263 was quashed.