2019 (3) TMI 1900 - AT - Income Tax

Revision u/s 263 - CIT observed that the assessee has made (i) provision for payment of interest on fixed deposit and (ii) provision for election/general body expenditure which was not examined - HELD THAT - We found that in the revision proceedings the assessee has not produced any proof in support of its claim and the method of accounting. Further, in respect of second issue of provision for election/general body expenditure even before the Tribunal, the learned AR could not substantiate with evidence in respect of the claim. Therefore, we, considering the facts and circumstances and the financial statements, are of the substantive opinion that though the AO has called for information in assessment proceedings in respect of other issues and there is no finding/observation on the above two disputed issues in the assessment order. We find that the CIT s action in revision proceedings that the AO has not made proper inquiry cannot be overlooked. Accordingly, we are not inclined to interfere with the order of the CIT on the disputed issues and affirm the same and dismiss the ground of appeal of the assessee. Order passed by the CIT is ex-parte - HELD THAT - Prima facie, the CIT(A) has passed the order considering the findings of the AO and there is no representation by the assessee or by the learned AR on the date of hearing. Further, the notice of hearing was sent on 11/08/2016 posting the case on 24/08/2016, being only one hearing provided to the assessee. Therefore, we, considering the principles of natural justice and the facts of the case and the assessee being a co-operative society, restore this disputed issue to the file of the AO to meet the ends of justice and AO shall call for the details and examine the claims.

Summary

Issues:
1. Revision of assessment order under section 263 of the Income-tax Act, 1961.
2. Applicability of section 145A to the case.
3. Validity of provision for payment of interest on fixed deposits and election/general body expenditure.
4. Compliance with accounting rules and methods by the cooperative society.

Issue 1: Revision of assessment order under section 263:
The appeal was filed against the Commissioner of Income-tax's order under section 263 of the Income-tax Act, 1961. The Tribunal heard both the assessee's appeal and the revenue's appeal together. The assessee challenged the revisionary powers exercised by the Commissioner, arguing that there was no error warranting revision. The Tribunal upheld the Commissioner's order, finding that the AO had not properly examined certain provisions, leading to an erroneous assessment order. The Tribunal dismissed the appeal against the revision order.

Issue 2: Applicability of section 145A:
The assessee claimed that section 145A did not apply to their case. The Tribunal noted that the AO disallowed certain deductions claimed by the assessee, leading to a revised assessment. The Tribunal found that the AO had not properly examined the provisions related to interest earned on deposits and fringe benefit tax, resulting in an erroneous assessment. The Commissioner's revision order was upheld by the Tribunal.

Issue 3: Validity of provision for payment of interest and election/general body expenditure:
The Commissioner found the AO's assessment order erroneous and prejudicial to revenue interests regarding the provision for payment of interest on fixed deposits and election/general body expenditure. The Tribunal observed that the AO had not adequately verified these provisions, leading to an erroneous assessment. The Tribunal upheld the Commissioner's order for a fresh assessment on these issues.

Issue 4: Compliance with accounting rules and methods:
The Tribunal considered the cooperative society's compliance with accounting rules and methods. The Tribunal noted discrepancies in the accounting treatment of provisions for expenses and interest payments. The Tribunal found that the AO had not conducted proper inquiries into these matters, leading to an erroneous assessment. The Tribunal upheld the Commissioner's order for a fresh assessment to ensure compliance with accounting rules.

In conclusion, the Tribunal dismissed the appeal against the revision order but allowed the appeal for a fresh assessment on specific issues related to interest payments and election/general body expenditure. The Tribunal emphasized the importance of proper verification and compliance with accounting rules for accurate assessments.