2013 (5) TMI 790 - AT - Income Tax

Revision u/s 263 - outstanding creditors or debtors unnoticed - Held that - Provisions of section 263 of the Act mandate that an order for enhancing, modifying or cancelling the assessment and directing afresh assessment can only be passed after giving an opportunity to the assessee of being heard and after making or causing to be made such enquiry as is deemed necessary. In the present case in appeal, neither in the show-cause notice dated January 11, 2012 nor in the subsequent show-cause notice dated January 11, 2012 nor even in any proceedings under section 263 of the Act, had he afforded an opportunity to the assessee on the issue of verification of the genuineness of the outstanding creditors of ₹ 35,27,224 or debtors amounting to ₹ 33,55,662. The learned Commissioner of Income-tax, however, travelled beyond the issues contained in the notices and thus his order on that count was not in accordance with the spirit of the provisions of section 263 of the Act in that regard. In view of the aforesaid finding and having regard to the judgment by the hon ble Delhi High Court in the case of CIT v. Ashish Rajpal 2009 (5) TMI 18 - DELHI HIGH COURT are set aside the order on these issues. - Decided in favour of assesse. Outstanding credit of ₹ 10.96 lakhs - Held that - It is admitted that the appellant has placed on record confirmations in assessment proceedings before the Assessing Officer. The learned Assessing Officer did not make any enquiry thereon and accepted the fact on its face value. This was to be termed as a case of only half-hearted enquiry as no definite conclusion could be arrived merely on the filing of confirmation before the Assessing Officer. The learned Commissioner of Income-tax in the present case only gave direction to decide afresh. Such a direction does not cause prejudice to the assessee as has also been held by the hon ble Madhya Pradesh High Court in the case of CIT v. Deepak Kumar Garg 2007 (5) TMI 186 - MADHYA PRADESH HIGH COURT . The learned Commissioner of Income-tax, therefore, is found justified in setting aside the order of the Assessing Officer to be erroneous in so far as it is prejudicial to the interests of the Revenue on this issue. - Decided against assesse. TDS reconciliation and trading account in various agricultural items - Held that - Assessing Officer has not made due and proper enquiry. The learned Commissioner of Income-tax merely gave direction to decide afresh. This causes no prejudice to the assesse - Decided against assesse.

Summary

Issues Involved:
1. Invocation of Section 263 by the Commissioner of Income-tax.
2. Verification of Sundry Creditors and Debtors.
3. Reconciliation of Commission (Adat) Receipts with TDS Certificates.
4. Examination of Claimed Loss in Trading Account for Agricultural Items.

Detailed Analysis:

1. Invocation of Section 263 by the Commissioner of Income-tax:
The primary issue raised by the assessee is that the Commissioner of Income-tax erred in invoking the provision of section 263 and setting aside the assessment order for the assessment year 2007-08. The Commissioner found the assessment order dated May 20, 2009, erroneous and prejudicial to the interests of the Revenue, leading to the issuance of a show-cause notice under section 263 on January 11, 2012.

2. Verification of Sundry Creditors and Debtors:
The Commissioner noted several discrepancies in the assessment:
- Non-verification of Sundry Creditors: The assessee showed creditors of Rs. 10.96 lakhs, but no further enquiry was made regarding the source, creditworthiness, and genuineness of fresh loans.
- Interest Discrepancies: The balance sheet showed sundry debtors of Rs. 33,55,662 and an interest amount of Rs. 57,795, including Rs. 25,000 from the bank. The remaining Rs. 32,795 was charged from various persons (farmers). The Commissioner concluded that the assessee charged interest but did not account for it properly in the books.
- Lack of Details: The Commissioner found that the Assessing Officer did not verify the full addresses of the farmers or the genuineness of transactions, making the assessment order erroneous and prejudicial to the Revenue. The Commissioner directed a fresh assessment to verify the identity and genuineness of transactions regarding sundry creditors and debtors and the claims of interest charged.

3. Reconciliation of Commission (Adat) Receipts with TDS Certificates:
The Commissioner observed that the Assessing Officer failed to reconcile the commission income shown by the assessee with the TDS certificates issued by the concerned parties. The assessee admitted a difference of Rs. 46,433 in commission payment without TDS. The Commissioner found this lack of verification by the Assessing Officer erroneous and prejudicial to the Revenue. The assessment order was set aside for a fresh assessment to verify the receipts from the commission and the propriety of tax deduction at source.

4. Examination of Claimed Loss in Trading Account for Agricultural Items:
The Commissioner noted that the Assessing Officer did not examine the reasonableness and genuineness of the claimed loss in the trading account for various agricultural items. The assessee admitted a gross loss of Rs. 730.25 in trading account for "makka," indicating that the point was not verified by the Assessing Officer. This lack of examination was considered erroneous and prejudicial to the Revenue.

Conclusion:
The Tribunal upheld the order under section 263 on limited issues, finding that the Commissioner acted within his jurisdiction and provided adequate opportunity to the assessee. The Tribunal agreed that the assessment order was erroneous and prejudicial to the interests of the Revenue due to a lack of proper enquiry by the Assessing Officer. The appeal was partly allowed, and the order pronounced in the open court on May 24, 2013.