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2023 (7) TMI 1324 - AT - Income TaxRevision u/s 263 - violation of of principal of natural justice - shorter period to reply to SCN - HELD THAT - The assessee was given only seven days to file the reply to the show cause notice. In compliance to the show cause notice the assessee filed reply and also requested the Pr. CIT to allow the assessee to produce the voluminous record in the physical form but due to paucity of time as the limitation was gone to expire on 31.03.2022 the Pr. CIT passed the impugned order without considering the explanation and replied filed by the assessee whereby the assessment order was set aside and matter was remanded for de novo assessment. Therefore, at the outset it appears to be a case of violation of principal of natural justice. As per CIT AO has discussed only disallowance made u/s 14A of the Act and there is no discussion on other issues as pointed out by the Pr. CIT in the show cause notice - Lack of enquiry or inadequate enquiry - As on-going through the reply filed by the assessee it is manifest that the assessee has given all these details and explanation as sought by the AO in the show cause notice issued u/s 142(1) of the Act. The AO even issued a second show cause notice dated 22.12.2019 asking the details regarding unsecured loans along with explanation in respect of disallowance u/s 14A r.w. Rule 8D. Finally the AO has made disallowance only u/s 14A and no disallowance or addition was made in respect of the other issues as raised in the show cause notice issued u/s 142(1) of the Act. Thus, it is clear that the AO has conducted an inquiry on these issues and was satisfied with the reply and explanation filed by the assessee along with supporting evidence. Hence it is not a case of complete lack of inquiry on the part of the AO while passing the assessment order and therefore, the assessment order cannot be held to be erroneous so far as the prejudicial to the interest of the revenue on the ground of lack of inquiry. Though the commissioner has jurisdiction to invoke the provision of section 263 even when the AO has conducted inquiry and taken a view but the said jurisdiction and power of commissioner is restricted only in the case, where the view taken by the AO is absolutely wrong and against provision of law. No such allegation has been made by the Pr. CIT in the impugned order that the view taken by the AO in allowing the claims and accepting the explanation of the assessee is absolutely not permissible under the law. Even otherwise we find that the assessee has duly explained discrepancies in the total receipts declared by the assessee in comparison to the receipts appearing in form 26AS and explained the reasons with supporting evidence that the said difference is due to the time difference in recognizing the revenue by the assessee and booking of expenditure by the contractee. It is matter of record that the assessee filed the reconciliation before the AO as well as before the Pr. CIT. Therefore, it was incumbent upon the Pr. CIT to verify the details produced by the assessee as well as reconciliation of difference in the receipts and to give a finding about the correctness of the claim of the assessee. The assessee has given the relevant details and explained difference of Rs. 1.97 cr being the income already declared by the assessee in the preceding year with the supporting bills and TDS which was deducted by the payee in the preceding year as well as for the year under consideration. Therefore, if the TDS details for two years are taken into consideration it goes to prove that only because of the difference of time in deducting the TDS by contractee the discrepancies appears in respect of the receipts as shown in the form 26AS and turnover declared by the assessee. All these details were produced by the AO and this is a recurring issue as already examined before the AO in the preceding assessment years. The AO did not feel any need to give an elaborate finding on this issue. Once it is a recurring issue and already examined in the preceding years and AO has duly conducted an inquiry by issuing show cause notice u/s 142(1) which was duly replied by the assessee with relevant record then the AO was not expected to give an elaborate finding on this issue. Similarly on the other issues when the AO has issued show cause notice and the assessee produced relevant details and supporting evidence in respect of the expenses incurred which were subjected to TDS wherever applicable and the extra expenditure was incurred for the year was specifically explained by the assessee giving the specific reasons of consumption of electricity in development of site in the remote rural area as well as the expenditure incurred on acquiring equipment of machinery require for carrying out construction work. All these details were available with the AO as filed by the assessee, therefore, this case is certainly does not fall in the category of lack of inquiry on the part of the Assessing Officer. Once AO has conducted an inquiry which may be inadequate inquiry but in that case it cannot be said that the order passed by the AO is erroneous due to complete lack of inquiry. Once the AO has conducted an inquiry and taken a view which is not found to be impermissible view then the Pr. CIT is not permitted to invoke the provision of section 263 of the Act merely because he does not agree with the view of the AO. Therefore, once the AO was satisfied with the supporting evidence produced by the assessee in response to the show cause notice u/s 142(1) then it is not necessary for the AO to give an elaborate finding on the issue. Accordingly, in the facts and circumstances of the case when the AO has conducted an inquiry then the Pr. CIT while passing the revision order cannot remand the matter back to the AO for passing afresh order simply because of the reason that the Pr. CIT himself was not sure about the correctness of the claim of the assessee. Therefore, once the order passed by the AO is not erroneous for want of inquiry then it is incumbent upon Pr. CIT to give conclusive finding that the order passed by the AO is not sustainable in law. Assessee appeal allowed.
Issues Involved:
1. Discrepancy in Receipts 2. Trade Payable and Trade Receivable 3. Material Consumed Expenses 4. Site Expenses, Electricity Expenses, Freight Expenses, and Food & Refreshment Expenses 5. Changes in Inventories Summary: 1. Discrepancy in Receipts: The Pr. CIT noticed a discrepancy between the receipts shown by the assessee in the books of account and those in Form 26AS. The assessee explained that the difference was due to the timing difference in recognizing revenue by the assessee and the contractee. The assessee provided reconciliation statements to both the AO and Pr. CIT, demonstrating that the discrepancy was only a timing issue and did not result in revenue loss. The Tribunal found that the AO had conducted an inquiry into this issue during the assessment proceedings and accepted the explanation provided by the assessee. 2. Trade Payable and Trade Receivable: The Pr. CIT observed that the AO did not conduct any inquiry regarding trade payables and trade receivables. The assessee submitted that all relevant details, including names, addresses, and PAN of the parties, were provided to the AO during the assessment proceedings. The Tribunal noted that the AO had specifically asked for these details in the notice issued under section 142(1) and had verified the information provided by the assessee. 3. Material Consumed Expenses: The Pr. CIT pointed out that the material consumed expenses had increased significantly compared to the previous year, and the AO did not verify these expenses. The assessee explained that the higher expenses were due to the development of a construction site in a remote area, which required significant electricity and material consumption. The Tribunal found that the AO had inquired into these expenses and was satisfied with the explanation provided by the assessee. 4. Site Expenses, Electricity Expenses, Freight Expenses, and Food & Refreshment Expenses: The Pr. CIT noted a significant increase in site expenses, electricity expenses, freight expenses, and food & refreshment expenses compared to the previous year. The assessee provided detailed explanations and supporting evidence for these expenses. The Tribunal observed that the AO had examined these expenses during the assessment proceedings and found them to be genuine. 5. Changes in Inventories: The Pr. CIT observed that the assessee had debited a significant amount under the head "Changes in inventories of finished goods, work-in-progress, and stock-in-trade" without providing an explanation. The assessee explained that the value of the closing stock was calculated based on the work completed and the material purchased and consumed. The Tribunal found that the AO had inquired into this issue and accepted the explanation provided by the assessee. Conclusion: The Tribunal concluded that the AO had conducted a proper inquiry into all the issues raised by the Pr. CIT and was satisfied with the explanations and evidence provided by the assessee. Therefore, the assessment order could not be held as erroneous for want of inquiry. The Tribunal set aside the order passed by the Pr. CIT under section 263 of the Act and allowed the appeal of the assessee.
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