2018 (7) TMI 2170 - AT - Income Tax

Revision u/s 263 - Iack of enquiry v/s inadequate enquiry - unexplained cash credit ad expenses - AO not properly examining the issues in the seized material marked as NRI-1 to NRI-40 for the assessment year 2012-13 - HELD THAT - It is a fact that the AO has conducted the survey u/s 133A and recorded the statements during the course of survey and found the discrepancies at the time of survey. All the above discrepancies were found by the AO at the time of survey and because of the discrepancies found during the course of survey, the assessment was reopened u/s 147 to examine the material available at the time of survey. Accordingly, the AO has taken up the case for assessment, called for the books of accounts, examined the books of accounts and completed the assessment. In this case, the entire material was available to the AO and the books of accounts were also made available to the AO. The assessee contended that the entries made in the rough cash book are nothing but the duplication of entries in the regular books of account and no separate cash was introduced. Therefore, once the AO examined the books of accounts, there is no basis for holding that the AO has not examined the issue merely because the AO has not recorded his finding with regard to issues in the rough note book in the assessment order or has not placed the relevant details in the assessment records. Pr.CIT cannot conclude that the AO has not examined the issue when the material is very much available with the AO. In these facts and circumstances, it is for the revenue to establish that the AO has not examined the issue in the reassessment, which the revenue has failed to do so. The Pr.CIT cannot consider the entries made in the rough cash book only with the withdrawals made from the bank. It has to be considered with regular cash book and withdrawals made from the bank account together. If the same is considered, there was no negative balance and the source of the entries made in the rough note book stands explained. Though lack of enquiry is a reason for taking up the case for revision, inadequate enquiry cannot be held to be erroneous and prejudicial to the interest of the revenue. Therefore, we hold that the assessment order passed by the AO was not erroneous and the revenue could not support it s contention that the AO has not enquired into the issues available in the impounded material. Therefore, the order passed by the CIT u/s 263 is unsustainable and accordingly cancelled. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed by the Pr.CIT under section 263 of the Income Tax Act, 1961.
2. Examination of cash credits and discrepancies noted during the survey under section 133A.
3. Assessment of whether the AO conducted a proper inquiry into the cash credits and discrepancies.

Detailed Analysis:

1. Validity of the order passed by the Pr.CIT under section 263 of the Income Tax Act, 1961:
The primary issue in this appeal is the validity of the order passed by the Pr.CIT under section 263 of the Income Tax Act, 1961, which allows for the revision of an assessment order if it is considered erroneous and prejudicial to the interests of the revenue. The assessee contested the Pr.CIT's decision, arguing that the AO had already examined all relevant materials, including the impounded documents, during the reassessment proceedings. The Pr.CIT, however, believed that the AO did not properly examine certain issues, particularly the cash credits noted in the impounded materials.

2. Examination of cash credits and discrepancies noted during the survey under section 133A:
During a survey conducted under section 133A on 19.03.2014, discrepancies were found regarding sundry creditors and the cost of construction, leading to the reopening of the assessment under section 148. The AO completed the assessment on 30.03.2015, determining a total income of ?1,20,41,627/-. The Pr.CIT later reviewed this assessment, noting that the AO had not adequately examined the cash credits and other discrepancies found in the impounded materials (NRI-1 to NRI-40), which included entries for cash credits and expenditures.

3. Assessment of whether the AO conducted a proper inquiry into the cash credits and discrepancies:
The assessee argued that the AO had indeed examined the books of accounts, bank statements, and other relevant materials before completing the assessment. They contended that the entries in the rough cash books were duplicates of entries in the regular books and that all transactions were accounted for within the regular books of accounts. The Pr.CIT, however, found discrepancies in the entries and concluded that the AO had not properly examined the sources of cash credits, thus deeming the assessment order erroneous and prejudicial to the revenue's interests.

The Tribunal observed that the AO had conducted a survey, recorded statements, and reopened the assessment to examine the discrepancies. The AO called for and verified the books of accounts and other materials before completing the assessment. The Tribunal noted that the AO's failure to record specific findings in the assessment order did not necessarily mean that the issues were not examined. The Tribunal concluded that the Pr.CIT's reliance on findings from a different assessment year (A.Y. 2014-15) was irrelevant for the year under consideration (A.Y. 2012-13).

The Tribunal held that the Pr.CIT's observations indicated inadequate inquiry rather than a lack of inquiry, and inadequate inquiry alone does not justify revision under section 263. Therefore, the Tribunal found that the assessment order passed by the AO was not erroneous and canceled the Pr.CIT's order under section 263.

Conclusion:
The Tribunal allowed the appeal of the assessee, concluding that the Pr.CIT's order under section 263 was unsustainable. The Tribunal emphasized that the AO had examined the relevant materials and that the Pr.CIT's concerns were more about the adequacy of the inquiry rather than its absence.