2016 (3) TMI 645 - AT - Income Tax

Revision u/s 263 - Held that - There is no discussion of whatsoever in his assessment order. He accepted the return of income of ₹ 9,49,940/- as income determined by the assessee. We cannot say what enquiry the AO has made to accept the return of income as true and correct. There are no details what kind of enquiry AO has made, how he has formed the opinion to accept the return of income as filed by the assessee. Then, the CIT empowered to initiate the suo moto proceedings u/s.263 of the Act either where AO takes wrong decision without considering material available on record or he takes a decision without making an enquiry into matters, where such enquiry was prima facie warranted. In the present case, the CIT has invoked the provisions of the section 263 of the Act on the reason that there was utter failure on the part of the AO to carry out necessary enquiry while completing he assessment on 30.12.2012 because of non-enquiry and non-application of mind by the AO. The Ld. CIT is justified in invoking the jurisdiction u/s.263 of the Act. Further, the CIT has not formed any opinion and he has cancelled the order of AO by directing to redo the assessment afresh after giving assessee a reasonable opportunity of being heard. Being so, we are of the opinion that the Ld. CIT is justified in invoking the jurisdiction u/s.263 of the Act. Since we have confirmed the invoking of jurisdiction u/s.263 of the Act, there is no finding by CIT on merit; whatever grievance of assessee on merit of issue raised by the CIT, to be considered by AO while framing assessment and AO shall not influence by anyway by the observation of CIT in his order. - Decided against assessee

Issues Involved:

1. Jurisdiction of invoking the provisions of Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT).
2. Non-compliance with TDS provisions under Section 194C.
3. Validity of the original assessment order under Section 143(3).
4. Whether the CIT's direction to redo the assessment was justified.

Issue-wise Detailed Analysis:

1. Jurisdiction of invoking the provisions of Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT):

The CIT invoked Section 263 of the Income Tax Act, which allows the Commissioner to revise an order if it is erroneous and prejudicial to the interests of the revenue. The judgment references the case of Malabar Industries Co. Ltd. (243 ITR 83)(SC), stating that an order is erroneous if it involves an incorrect assumption of facts, incorrect application of law, or non-application of mind. The order must also be prejudicial to the interests of the revenue. The CIT observed that the Assessing Officer (AO) failed to verify the TDS compliance on lorry freight charges, thus making the assessment order erroneous and prejudicial to the revenue's interests.

2. Non-compliance with TDS provisions under Section 194C:

The CIT noted that the assessee failed to provide requisite information relating to TDS on lorry freight charges amounting to Rs. 70,76,83,553/-. According to Section 194C, TDS must be deducted on payments to contractors. The CIT observed that the AO did not verify the TDS compliance, which should have attracted disallowance under Section 40(a)(ia). The assessee argued that TDS was deducted for the first and second quarters and that no TDS was required for the third and fourth quarters as per Section 194C(6), provided the transporters furnished their PAN.

3. Validity of the original assessment order under Section 143(3):

The original assessment under Section 143(3) was completed on 30.12.2012, accepting the returned income without any adjustments. The CIT found that the AO did not make any verification or investigation regarding the TDS on lorry freight charges. The judgment emphasizes that the AO's order was very cryptic, with no discussion or details on the enquiry made. This lack of enquiry and application of mind justified the CIT's invocation of Section 263.

4. Whether the CIT's direction to redo the assessment was justified:

The CIT directed the AO to redo the assessment after making necessary enquiries and giving the assessee a reasonable opportunity to be heard. The tribunal upheld this direction, stating that the CIT did not form any opinion on the merits and merely set aside the AO's order for a fresh assessment. The tribunal confirmed that the CIT was justified in invoking Section 263 due to the AO's failure to conduct necessary enquiries. The tribunal also noted that any grievances regarding the merits of the issue raised by the CIT should be addressed during the fresh assessment by the AO.

Conclusion:

The tribunal dismissed the assessee's appeal, confirming the CIT's invocation of Section 263 and the direction to redo the assessment. Consequently, the stay petition filed by the assessee was also dismissed as infructuous. The judgment underscores the importance of thorough enquiry and application of mind by the AO in the assessment process to avoid orders being deemed erroneous and prejudicial to the revenue's interests.

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