Revision u/s 263 arising from tax auditors comment upheld as AO did not examine it

Revision u/s 263 arising from tax auditors observation upheld as AO did not examine the matter

In a recent judgment, ITAT Chennai has upheld revisionary proceedings u/s 263 which stemmed from observation of Tax Auditor that there was remission of trading liability u/s 41(1)(a) of the Act and the AO had not examined the issue.

ABCAUS Case Law Citation:
4243 (2024) (08) abcaus.in ITAT

In the instant case, the assessee had challenged the invocation of revisionary jurisdiction u/s 263 of the Income Tax Act, 1961 (the Act)  by Pr. Commissioner of Income Tax (Pr.CIT) vide impugned order set aside the assessement order framed by Assessing Officer u/s 143(3) r.w.s 144B of the Act.

The assessee was a resident firm engaged in the business of real estate development. For the relevant assessment year it was assessed u/s 143(3) r.w.s 144B accepting the returned income.

Subsequently, Pr.CIT, upon perusal of Tax Audit Report in Form 3CD, noted that the Tax Auditor had reported a sum being chargeable to tax u/s 41(1) on account of remission /cessation of trading liability.

This issue was not examined by AO and accordingly, the assessee was show-caused. The assessee opposed the same, inter-alia, on the ground that the impugned amount was credited

under the head ‘sundries written-off’ which was treated as other income in the Profit & Loss Account. In support, the assessee furnished ledger extracts also. However, since ledger of each account was not submitted separately, the Pr. CIT directed Ld. AO to examine this aspect with a direction to the assessee to furnish the requisite documents.

Aggrieved, the assessee filed the instant appeal.

The Tribunal observed that the revisionary proceedings stemmed from the observation of Tax Auditor that there was remission of trading liability u/s 41(1)(a) of the Act. On the face of the assessment order, it could be seen that this issue was never examined by the AO. though the assessee contended that this amount was already offered to tax as other income, however, it failed to adduce supporting ledger accounts during revisionary proceedings.

The Tribunal further observed that the assessee had reiterated the same arguments before it. However, complete reconciliation, in this regard, has not been filed before the Tribunal also.

The Tribunal opined that the revision of the order could not be faulted with. The AO may re-examine the fact whether the amount reported by Tax Auditor has already been offered to tax. If so, no further addition would be warranted. The assessee was directed to substantiate the same.

Accordingly, the appeal was dismissed.

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• Order u/s 69 of the CGST Act has to be communicated before arrest of person concerned– SC
• Refund can not be denied on the ground that it was claimed in a return filed u/s 148 – ITAT
• Distinction between religious & charitable purposes is determined by institution’s primary or dominant object
• Fit case to issue notice u/s 148 – Relevancy of material & application of mind to objections important
• AO is under an obligation to assign reasons for rejecting explanation of the assessee