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2022 (6) TMI 1422 - AT - Income TaxRevision u/s 263 - distinction between lack of inquiry and inadequate inquiry - Second revision orders - As per CIT AO failed to make an enquiry as to why the assessee has offered net income and not the gross income - HELD THAT - Action at the end of the ld. Pr. CIT is not justifiable. He has exercised the powers without analytically examining the report. The reason for taking the first two reasons together was for appreciating this factual aspect. On reason no. 2, the ld. Pr. CIT did not go through the record that earlier 263 proceedings were initiated against the assessee and those were dropped. What made him to again initiate the proceedings, is not discernable. There was no fresh information about this aspect and the same aspect has already been considered by his predecessor. It suggests that there was no application of mind at the end of the ld. Pr. CIT. Enquiry was initiated on the premises that the assessee has not included in its disclosed income. When the assessee has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms. CIT wanted to verify the inclusion of the income. The assessee has demonstrated that it has offered tax on net basis and income has to be offered on net basis only. Nothing remains to be explored on the ground that as to how the gross income was not offered. It is not the case of the revenue that the assessee has claimed excessive expenditure or the expenditure were not to be granted to the assessee. Therefore, to our mind the impugned order is not sustainable because the ld Pr. CIT failed to make a complete analysis of the record. Nothing is available on the record which authorizes the ld. Pr. CIT to take action u/s 263 of the Act Commission payment - AO has made an enquiry during the assessment proceedings. The cognizance of the letter written by the DDIT Mumbai was taken up and it was explained by the assessee in its reply. The reference of this letter in the reply of the assessee would suggest that it must have been brought to the knowledge of the AO. There could not be any occasion of the assessee to make reference of this letter in his reply which suggest that these details were discussed by the AO and thereafter he exercised his discretion. The grievance of the ld. Pr. CIT is that the AO has accepted this stand of the assessee without any verification or enquiry. This reasoning is factually incorrect as the case on hand does not reflect inadequate/non-enquiry at the behest of the AO. The assessment order cannot be set aside on this reasoning by invoking Section 263. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of action under Section 263 of the Income Tax Act. 2. Inclusion of Rs. 20,17,86,432/- in disclosed income. 3. Examination of the claim of deduction under Section 35(2AB). 4. Allowance of commission payment of Rs. 1,61,83,762/- without proper enquiry. Issue-wise Detailed Analysis: 1. Validity of Action Under Section 263 of the Income Tax Act: The assessee contested the validity of the action taken under Section 263, arguing it was time-barred. The assessment year in question was 2015-16, and the assessment order was passed on 31/03/2017. The time limit for passing an order under Section 263 is two years from the end of the financial year in which the order sought to be revised was passed, expiring on 31/03/2020. However, the impugned notice under Section 263 was issued on 15/01/2021. The Revenue argued that an Ordinance issued on 31/03/2020 extended the limitation period due to the COVID-19 pandemic. The Tribunal agreed with the Revenue, noting the Ordinance extended the limitation for issuing notices, making the action under Section 263 timely. 2. Inclusion of Rs. 20,17,86,432/- in Disclosed Income: The Pr. CIT initiated proceedings under Section 263, stating the assessee did not include Rs. 20,17,86,432/- in its disclosed income. The assessee demonstrated that it had included this income, showing detailed computations and bifurcations. The Pr. CIT acknowledged the inclusion but shifted the focus to why the assessee offered net income instead of gross income. The Tribunal found this shift unjustified, noting the original issue was whether the income was included, not the nature of its inclusion. The Tribunal concluded that the Pr. CIT's action lacked proper analysis and was not sustainable. 3. Examination of the Claim of Deduction Under Section 35(2AB): The Pr. CIT had previously initiated and then dropped proceedings under Section 263 on this issue. The Tribunal noted that revisiting the same issue without new information was unjustifiable. The Tribunal emphasized that once the Pr. CIT was satisfied with the assessee's explanation and dropped the proceedings, it should not be taken up again. The Tribunal found no justification for the Pr. CIT's action, deeming it impermissible under the law. 4. Allowance of Commission Payment of Rs. 1,61,83,762/- Without Proper Enquiry: The Pr. CIT argued that the Assessing Officer allowed the commission payment without proper enquiry. The assessee provided detailed replies and evidence, including invoices and TDS details, during the assessment. The Tribunal noted that the Assessing Officer had considered these details and accepted the assessee's stand. The Tribunal emphasized that the absence of detailed discussion in the assessment order does not imply no enquiry was conducted. The Tribunal found the Pr. CIT's reasoning factually incorrect, as the assessment reflected adequate enquiry. Consequently, the Tribunal quashed the order under Section 263 for lack of proper justification. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the order passed under Section 263 for the assessment year 2015-16. The Tribunal found that the Pr. CIT's actions lacked proper analysis, were unjustified, and revisited settled issues without new information. The Tribunal emphasized the importance of proper enquiry and analysis before invoking Section 263.
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