2018 (3) TMI 1744 - AT - Income Tax

Condonation of delay - 852 days - bonafide opinion that the directions of ld. CIT was appealable before the CIT(A) - lack of knowledge on the appeal proceedings - HELD THAT - Considering the decision of COLLECTOR, LAND ACQUISITION VERSUS MST. KATIJI AND OTHERS 1987 (2) TMI 61 - SUPREME COURT and reasons for delay in filing the appeal, we condone the delay in filing the appeal before us on the ground that the assessee was prevented by reasonable cause in filing the appeal belatedly. Revision u/s 263 - difference in sales recorded in financial statements and VAT returns - difference in sales and claim of excise duty - issue not elaborately discussed in the order passed u/s 143(3) - HELD THAT - We find that during the course of assessment proceedings, AO has asked for the information relating to sales and accordingly, assessee has filed the reasons for difference in sales recorded in financial statements and VAT returns. The same was verified and accepted by the AO, even though, he has not discussed elaborately in the order passed u/s 143(3) We find that the Hon ble Bombay High Court and Delhi High Court, respectively, came to the conclusion that CIT cannot direct the AO to conduct further enquiry to verify without examining the aspect himself. See DG HOUSING PROJECTS LTD 2012 (3) TMI 227 - DELHI HIGH COURT and DEVELOPMENT CREDIT BANK LIMITED 2010 (2) TMI 161 - BOMBAY HIGH COURT - Decided in favour of assessee AO disallowed the difference in sales and claim of excise duty, with regard to difference in sales, assessee has already explained before the AO and also submitted reconciliation statement before us which we found to be in order. With regard to excise duty, it is the method of accounting adopted by the assessee regularly as per the guidance note issued by ICAI with regard to valuation of excisable finished goods. We find that even on merits, both the disallowances are not sustainable. Therefore, the appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the order passed under Section 263 of the Income-tax Act, 1961.
3. Examination of discrepancies in sales and claims related to excise duty and MAT credit.

Detailed Analysis:

Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the order of CIT-1, Hyderabad, dated 03/03/2014, for AY 2009-10 with a delay of 852 days. The delay was attributed to a bona fide belief that the directions of the CIT were appealable before the CIT(A). The assessee claimed a lack of knowledge on the appeal proceedings and requested condonation of delay. The Tribunal noted that the Revenue did not file any counter-affidavit or objection against the delay. Citing the Supreme Court's decision in Collector, Land Acquisition Vs. MST. Katiju and others, the Tribunal emphasized a liberal approach towards condoning delays to serve substantial justice. Consequently, the delay was condoned, and the appeal was admitted for hearing and adjudication.

Validity of the Order Passed Under Section 263:
The CIT invoked Section 263, noting discrepancies in sales figures and claims for excise duty and MAT credit, deeming the AO's order erroneous and prejudicial to the interests of the revenue. The CIT directed the AO to re-examine these issues. The assessee contended that the AO had already scrutinized these aspects during the original assessment proceedings and provided all necessary details, including a reconciliation statement of sales and VAT returns. The Tribunal referenced decisions from the Bombay High Court and Delhi High Court, asserting that the CIT cannot direct the AO to conduct further inquiries without examining the aspects himself. The Tribunal concluded that the CIT's invocation of Section 263 was unjustified as the AO had already conducted an inquiry and accepted the explanations provided by the assessee. Therefore, the order under Section 263 was quashed.

Examination of Discrepancies in Sales and Claims Related to Excise Duty and MAT Credit:
The Tribunal reviewed the assessment proceedings and found that the AO had asked for and received explanations regarding the sales discrepancies and claims for excise duty and MAT credit. The AO had accepted the explanations, which were consistent with the accounting standards and guidance notes issued by ICAI. The Tribunal held that the CIT's directive for further examination was unwarranted since the AO had already verified these issues. Consequently, the Tribunal found no merit in the disallowances made by the AO in the consequential order passed under Section 143(3) rws 263 and allowed the appeal on merits.

Conclusion:
The Tribunal allowed both appeals filed by the assessee, quashing the order under Section 263 and the consequential order, and upheld the explanations provided by the assessee regarding sales discrepancies and claims for excise duty and MAT credit. The judgment emphasized the importance of substantial justice over technicalities and reinforced the principle that revisional authorities must conduct their own examinations before directing further inquiries.