2015 (10) TMI 1883 - AT - Income Tax

Revision u/s 263 - as per CIT(A) AO failed to examine various issues regarding contracts entered into with M/s. IJM (India) Infrastructure Ltd. and Madras Cements Ltd., diesel expenses incurred by the assessee in respect of excavator, lease hire charges paid to Smt. A.Saraswathi, Pondicherry, Mr. K.S.Subbaraman, Tindivanam and Mr. S.Navaneethakrishnan, Tindivanam @ ₹ 6,00,000/- each and ₹ 1,90,25,860/- debited to income and expenditure account by the assessee in respect of hire charges paid by the assessee and the applicability of provisions of section 40(a)(ia) on such payments, excess funds flow over and above the funds available etc - Held that - Assessing Officer neither called for any details with regard to various issues raised by the Commissioner of Income Tax in the show cause notice nor made any enquiries before allowing the claims of the assessee while completing the assessment. In the case of M/s. Malabar Industrial Co.Ltd., (2000 (2) TMI 10 - SUPREME Court ), the as held that an incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous. Similarly, orders passed without applying the principles of natural justice or without application of mind are also erroneous . In the instant case, the Assessing Officer while completing the assessment under section 143(3) never applied his mind to various issues as pointed out by the Commissioner of Income Tax in his order. AO has passed the assessment order allowing the claims of the assessee without calling for the details and examining them. Accordingly, we uphold the impugned order of the Commissioner of Income Tax of revision - Decided against assessee.

Summary

Issues:
Challenge to order under section 263 invoking provisions of section 263, assessment order under section 143(3) dated 31.12.2011 for assessment year 2009-10, erroneous assessment, prejudicial to revenue, direction for assessment de novo.

Analysis:
The appeal challenges the Commissioner of Income Tax's order under section 263, setting aside the assessment order under section 143(3) for the assessment year 2009-10 as erroneous and prejudicial to revenue, directing a de novo assessment. The assessee, engaged in civil contracts, filed the return admitting income of &8377; 15,18,040, later assessed at &8377; 16,83,040. The Commissioner raised issues regarding contracts with specific entities, diesel expenses, lease hire charges, and funds flow, among others. The assessee responded, arguing the assessment was not erroneous. The Departmental Representative supported the Commissioner's order, stating the Assessing Officer did not examine the raised issues. The Tribunal found the Assessing Officer disallowed some expenses but failed to investigate other issues. The Tribunal cited legal precedents emphasizing errors due to incorrect facts or law application. It noted the Assessing Officer's failure to apply his mind to the raised issues, deeming the assessment erroneous and prejudicial to revenue. The Tribunal upheld the Commissioner's order under section 263, directing a fresh assessment.

Conclusion:
The Tribunal dismissed the assessee's appeal, affirming the Commissioner's order under section 263 for a de novo assessment due to the Assessing Officer's failure to address raised issues adequately, rendering the initial assessment erroneous and prejudicial to revenue. The Tribunal distinguished cited case laws and upheld the direction for a fresh assessment.