2012 (1) TMI 225 - AT - Income Tax

Revision u/s 263 - Held that - CIT noticed that during the course of proceedings u/s 263 of the Act the amount shown is more as compared to the amount shown by the assessee in its books of accounts. The difference is on account of discount which according to the assessee is not included in the receipts mentioned in the TDS certificate. According to the ld. CIT, the AO has not examined this issue and the AO has not even discussed the issue in the assessment order. We have noticed from the assessment order that the AO issued a detailed query letter on 2-11-2006 and in response to that query letter, the assessee filed the written submission before the AO. The paper book filed before us by the assessee does not contain either query letter or reply submitted before the AO. The details have been filed before the AO during the course of set aside assessment proceedings. As a result of order u/s 263 of the Act, it is clear from the record that the ld. AR has not been able to satisfy us that AO made enquiry during the course of assessment proceedings. If the AO fails to make any enquiry then the order is definitely erroneous and prejudicial to the interest of the revenue. Since the AO has not applied his mind, therefore, we do not feel to record the findings that reconciliation filed by the assessee is correct. Hence, we hold that the ld. CIT was justified in passing the order u/s 263 of the Act

Summary

Issues:
Appeal against orders passed by the CIT under section 263 for assessment year 2005-06 regarding alleged suppression of job charges.

Analysis:

Issue 1: Alleged suppression of job charges
The assessee contended that the CIT erred in holding the assessment order passed by the AO as erroneous and prejudicial to the revenue's interest due to the alleged suppression of job charges received from a company. The AO had made a disallowance of only Rs. 10,000 while passing the assessment order under section 143(3). The CIT initiated proceedings under section 263 based on the difference between job charges shown in the books and as per the TDS certificate. The assessee explained that the variance was due to discounts allowed, supported by ledger accounts. However, the CIT found the explanation unacceptable, alleging that the discount was added later to reduce income, which was not examined by the AO, leading to an erroneous assessment. The AR argued that the AO had examined the details, and the CIT's order lacked justification. The Tribunal held that if the AO failed to make necessary inquiries, the order could be deemed erroneous and prejudicial to revenue, supporting the CIT's decision under section 263.

Issue 2: Lack of discussion in the assessment order
The AR argued that even if an issue was not discussed in the assessment order, if details were provided and accepted by the AO, the order should not be considered erroneous. Citing relevant case laws, the AR contended that the absence of discussion in the assessment order did not automatically render it prejudicial to revenue. However, the Tribunal emphasized that if the AO did not apply his mind or make necessary inquiries, the order could be deemed erroneous. The Tribunal upheld the CIT's decision under section 263 based on the lack of proper examination by the AO.

Issue 3: Similarity in another case
In a similar case involving another assessee, the CIT directed the AO to examine the issue of alleged suppression of job charges. The Tribunal found the facts analogous to the previous case and upheld the CIT's decision under section 263. Both appeals of the assessee were dismissed, affirming the orders passed by the CIT under section 263 for the assessment year 2005-06.

In conclusion, the Tribunal upheld the CIT's orders under section 263, emphasizing the importance of proper examination and inquiry by the AO to avoid erroneous assessments. The appeals against the orders passed by the CIT for alleged suppression of job charges were dismissed for the assessment year 2005-06.