2016 (4) TMI 264 - HC - Income Tax

Revision orders by CIT(A) - addition on account of the cash deposits - Held that - In the impugned order proceeds on a factually erroneous basis that there was no response to the notice issued to M/s Enkay Electricals under Section 133(6) of the Act. Although in the impugned order the CIT-XII notes that a confirmation letter of M/s Enkay Electricals was produced, it is not discussed. The appropriate course for the CIT-XII to adopt would have been to provide an opportunity to the Assessee to produce the said party before the CIT-XII to clarify whether the confirmation letter was in fact issued by such party. Addition on account of unconfirmed creditors - Held that - A reference was made in the impugned order of the CIT-XII to notices issued under Section 133(6) of the Act to the named creditors. The CIT-XII also noted that notices issued to four of the creditors were returned unserved. However, the dates on which the said notices were issued and the dates on which they were returned unserved are not clear. This attains significance since confirmation letters appear to have been issued in November 2011 by those very parties (copies of which have been enclosed with the rejoinder affidavit). Here, again the Court finds that the procedure adopted by the CIT-XII in dealing with the objections of the Assessee is not satisfactory. The CIT-XII appears to have simply repeated the findings of the AO. Thus the Court set asides the impugned order passed by the CIT-XII and restores the Petitioner Assessee s revision petition to the file of the CIT-XII for a fresh hearing uninfluenced by the previous decision of the CIT-XII or by any of the observations in the present order. The CIT-XII will provide the Assessee with a copy of the AO s remand report and also permit the Assessee to produce the parties who have issued confirmation letters in its favour. - Decided in favour of assessee by way of remand.

Summary

Issues:
Challenge to order passed by CIT-XII under Section 264 of the Income Tax Act, 1961.

Analysis:
The petitioner, a partnership firm engaged in the business of electrical equipment, challenged an order passed by the Commissioner of Income Tax, Delhi-XII (CIT-XII) under Section 264 of the Income Tax Act, 1961. The petitioner filed a return of income for the Assessment Year 2009-10, which was subjected to scrutiny resulting in significant additions to the income. The petitioner withdrew the appeal filed against the assessment order and filed a revision petition before the CIT-XII. The main challenge raised by the petitioner was regarding the procedure adopted by the CIT-XII in dealing with the revision petition and failing to consider specific points raised by the petitioner.

Under Section 264(1) of the Act, the CIT is empowered to call for the record of the proceedings and make inquiries while passing an order not prejudicial to the assessee. The petitioner contended that the CIT-XII did not provide an adequate opportunity and failed to consider relevant materials. The court noted discrepancies in the handling of the case, particularly regarding the remand report called for by the CIT-XII from the Assessing Officer. The court emphasized that the petitioner should have been provided with a copy of the remand report for a fair opportunity to respond.

The court highlighted specific instances where the CIT-XII's handling of the petitioner's objections was unsatisfactory. For example, in the case of additions related to unconfirmed creditors and cash deposits, the CIT-XII merely repeated the findings of the Assessing Officer without adequately considering the petitioner's submissions. The court stressed the importance of providing the petitioner with an opportunity to clarify and produce relevant evidence in support of their case.

Ultimately, the court set aside the impugned order passed by the CIT-XII and directed a fresh hearing of the petitioner's revision petition. The CIT-XII was instructed to provide the petitioner with a copy of the AO's remand report and allow the petitioner to produce parties who issued confirmation letters. The court mandated the CIT-XII to dispose of the revision petition within six months from the date of the order, focusing on procedural fairness and unbiased consideration of the petitioner's case.

In conclusion, the court's decision centered on the procedural shortcomings in the CIT-XII's handling of the revision petition, emphasizing the importance of providing the assessee with a fair opportunity to present their case and respond to relevant materials.