2013 (9) TMI 1078 - AT - Income Tax

Revision U/S 263 - unexplained investment - Held that - A.O. had not made any inquiry with regard to the investment made in shares for ₹ 53,70,000/- and source of investment therein. The fund was mixed up i.e. owned fund as well as borrowed fund. The appellant had paid interest of ₹ 5,80,773/-, which has been allowed by the A.O. without verifying. Further, there was a disclosure u/s. 133A of the IT Act on account of excess stock of ₹ 3,11,427/- whereas the appellant also debited the similar amount in purchase account. Effectively, the appellant had neutralized the disclosure by debiting the purchase. The ld. A.O. had not verified the fact and no inquiry had been made before accepting the assessee s claim under both the heads. The A.O. raised the query but the assessee did not reply on both aspects before him. The ld. CIT has set aside the order to the A.O. and directed to pass order as per law after proper verification and inquiry. Thus, we have considered view that ld. CIT s order is not a change of opinion but is as per the Hon ble Supreme Court decision in case of Malabar Industrial Company Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME Court .

Summary

Issues involved:
Late appeal condonation, Revision u/s. 263 of the Act, Erroneous assessment order, Prejudicial to revenue, Necessary inquiries, Investment in shares, Source of investment, Mixed funds, Interest deduction, Disclosure u/s. 133A, Excess stock, Proper verification, Change of opinion.

Late appeal condonation:
The appeal was late by 104 days, but the appellant provided reasons for the delay. The Tribunal condoned the delay and allowed the appeal to proceed.

Revision u/s. 263 of the Act - Erroneous assessment order - Prejudicial to revenue:
The CIT passed an order u/s. 263 treating the assessment order u/s. 143 for A.Y. 2004-05 as erroneous and prejudicial to revenue. The appellant argued that the A.O. had made necessary inquiries and reached a definite conclusion, so the CIT's revision was unjustified. The CIT found the assessment prejudicial to revenue due to issues like mixed funds, unverified investments, and lack of proper inquiries.

Investment in shares - Source of investment - Mixed funds - Interest deduction:
The assessment involved an investment in shares, where the source of investment was questioned due to mixed funds of the appellant. The A.O. allowed a significant interest deduction without proper verification, leading to discrepancies in the disclosure of excess stock and debiting the purchase account.

Disclosure u/s. 133A - Excess stock - Proper verification:
The appellant disclosed excess stock under section 133A, but also debited a similar amount in the purchase account, neutralizing the disclosure. The A.O. failed to verify these facts and did not conduct necessary inquiries before accepting the appellant's claims.

Change of opinion - Proper verification:
The Tribunal upheld the CIT's decision to set aside the assessment order and direct a fresh assessment after proper verification and inquiry. The Tribunal clarified that the CIT's order was not a change of opinion but aligned with legal precedents, emphasizing the importance of thorough verification.

In conclusion, the Tribunal dismissed the appellant's appeal, affirming the CIT's decision to set aside the assessment order and emphasizing the necessity of proper verification and inquiry in assessing tax matters.