9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (11) TMI 1903 - AT - Income TaxRevision u/s 263 by CIT - minimal enquiries to show that the conclusion of the AO is erroneous and prejudicial to the interests of the Revenue - how the error can be said to be prejudicial to the interests of the Revenue? - HELD THAT - As it is eminently borne out from the record that on each of the issues flagged by the Pr. CIT the AO has more than adequately enquired into these at length in the course of the assessment proceedings. The said fact evident on record was specifically brought to the notice of the Pr. CIT on behalf of the assessee. The arguments, we find were supported by relevant documents and evidences to demonstrate its claim. The fact that the submissions as advanced on the questionnaires and queries as raised by the A.O have been replied to by the assessee is not disputed by the Pr. CIT. The presumptions made in the peculiar facts and circumstances that it was not enquired into is unsupported by any contrary fact or evidence. Thus, to seek to discard the assessee's explanation in the absence of fact or evidence cannot be supported. Once all necessary facts and evidences were available before the Pr. CIT then even in terms of Explanation-2 to Section 263, it was incumbent upon the Pr. CIT to demonstrate that the order passed is erroneous and prejudicial to the interests of the Revenue. In order to demonstrate that it was incumbent upon him to atleast attempt to make a semblance of same minimalistic enquiry to assail the facts and evidences available on record to show that the A.O has just sat on the replies and not considered them. It is for the Pr. CIT to show that had any further queries been made by the A.O then the order passed could not have been passed as it would have been erroneous and prejudicial to the interests of the Revenue. Without assailing the facts and evidences the presumption based on mere suspicions that no enquiries or verification was made, does not clothe the Pr. CIT with the powers to exercise his Revisionary Powers. In the absence of the same it is an attempt at fishing and roving enquiries by the Pr. CIT invoking Explanation-2(a) or 2(b) of Section 263 which presumably has been invoked as in order to demonstrate that Explanation 2(c) or 2(d) of Section 263 was invoked, nothing has been placed on record by the Pr. CIT. So it is presumed that the Pr. CIT sought to invoke either Explanation 2(a) or 2(b) of Section 263. The Revisionary Power vested in the Pr. CIT, it is expected, would be exercised in a careful and responsible manner. Admittedly on each of the issues flagged by the Pr. CIT, the assessee's replies made available have been carelessly and arbitrarily brushed aside by stating that AO has not made any verification or enquiry. In order to demonstrate that there was an error, in terms of the judicial precedent available, the Pr. CIT should have carried the issue to its logical conclusion and not remanded the order with the bland direction directing that the assessment be made afresh Notwithstanding the fact that the writing of the order is not in the hands of the assessee, the assessee at best can rely on the questionnaires issued by the A.O requiring the assessee to address and explain the flagged issue. The fact remains that having raised various issues by way of questionnaires, the AO further raised questionnaires and order-sheet entries etc. The assessee is well justified in relying upon the presumption that the AO was satisfied by the explanation of the assessee. It is well accepted that it is not necessary for the A.O to refer and include in his order the discussion on issues on which he is satisfied by the explanation offered. The said legal position is well settled. The Pr. CIT in the circumstances needs to demonstrate the error and such an error which is also prejudicial to the interests of the Revenue. He is not expected to sit over the explanation and evidences on record. We may refer to the decision of CIT Vs M/s Fine Jewellery India 2015 (2) TMI 732 - BOMBAY HIGH COURT wherein reliance has been placed upon Idea Cellular Ltd 2008 (2) TMI 146 - BOMBAY HIGH COURT wherein Court has held; if a query is raised during the assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the assessment order would not lead to a conclusion that no mind had been applied to it . In the facts of the present case, the Pr. CIT has exercised the power by merely flagging certain issues extracting the Show Cause Notice, extracting part of the reply of the assessee and without caring to address the same has summarily arrived at the conclusion ignoring the facts, evidences and plethora of jurisprudence available on the issue which casts responsibility on the Pr. CIT to point being out the error and not any and every error but such an error which is prejudicial to the interests of the Revenue. The twin requirements and the sine-qua-non for exercising the Revisionary Power cannot be left at the mercy of whims and fancies of Revisionary Authority the same should be brought out on record mere suspicions are not enough. Accordingly, on a consideration of material available on record alongwith the arguments of the parties and the judicial precedent available for the detailed reasons set out hereinabove we hold that the order passed by the Pr. CIT being devoid of merit deserves to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Assumption of jurisdiction under section 263 of the Income Tax Act. 2. Failure to consider various replies and submissions. 3. Lack of inquiry by the Assessing Officer (AO) on specific issues raised by the Principal Commissioner of Income Tax (Pr. CIT). Detailed Analysis: 1. Assumption of Jurisdiction under Section 263: The main contention of the assessee was that the Pr. CIT wrongly assumed jurisdiction under section 263 of the Income Tax Act to set aside the assessment order dated 25.05.2015. The assessee argued that the order was neither erroneous nor prejudicial to the interest of Revenue. The Tribunal found that the AO had made detailed inquiries on all issues flagged by the Pr. CIT during the assessment proceedings. The Tribunal noted that the Pr. CIT failed to demonstrate any error in the AO's order that was prejudicial to the interests of the Revenue. The Tribunal emphasized that the Pr. CIT should have made some minimalistic inquiry to establish that the AO's order was erroneous and prejudicial to the interests of the Revenue. 2. Failure to Consider Various Replies and Submissions: The assessee contended that the Pr. CIT did not consider the various replies and submissions placed on record. The Tribunal examined the records and found that the AO had raised specific queries through questionnaires and order-sheet entries, which were duly replied to by the assessee. The Tribunal noted that the Pr. CIT did not bring any contrary evidence or fact to support the conclusion that the AO had not made any inquiries or verification. The Tribunal concluded that the Pr. CIT's presumption that the AO did not make any inquiries was unsupported by any evidence. 3. Lack of Inquiry by the Assessing Officer: The Pr. CIT had identified several issues where he believed the AO had not made adequate inquiries: - Outward Remittances: The Pr. CIT claimed that the AO did not examine the nature of payments made in foreign currency, especially regarding commission and registration of trademarks without deduction of tax at source. The Tribunal found that the AO had raised specific queries and received detailed replies from the assessee, supported by documentary evidence. - Currency Variations: The Pr. CIT argued that the AO did not examine the transactions resulting in loss due to foreign exchange currency variation. The Tribunal noted that the AO had called for detailed explanations and supporting documents, which were provided by the assessee. - Additions in Fixed Assets: The Pr. CIT contended that the AO did not verify whether the assets were installed and put to use during the year. The Tribunal found that the AO had raised specific queries and received detailed replies, including sample invoices and other supporting documents. - Purchases from Persons Covered under Section 40A(2)(b): The Pr. CIT claimed that the AO did not verify whether the transactions were at arm's length. The Tribunal noted that the AO had raised specific queries and received detailed replies, supported by form No. 3CEB and other documents. - Commission Payment: The Pr. CIT argued that the AO allowed sales commission without proper verification. The Tribunal found that the AO had raised specific queries and received detailed replies, supported by certificates from Chartered Accountants and other documents. The Tribunal concluded that the Pr. CIT failed to demonstrate any error in the AO's order that was prejudicial to the interests of the Revenue. The Tribunal emphasized that the Pr. CIT should have made some minimalistic inquiry to establish that the AO's order was erroneous and prejudicial to the interests of the Revenue. Conclusion: The Tribunal quashed the orders passed by the Pr. CIT under section 263 of the Income Tax Act in both appeals, holding that the exercise of power was arbitrary and whimsical. The Tribunal emphasized that the Pr. CIT failed to demonstrate any error in the AO's order that was prejudicial to the interests of the Revenue and did not make any minimalistic inquiry to support his conclusions. The appeals of the assessees were allowed.
|
