2017 (5) TMI 1314 - AT - Income Tax

Revision u/s 263 - Held that - CIT exercising his powers vested u/s 263 set aside the order of the AO passed u/s 143(3) on the ground that the AO has not made any enquiry nor called for any details in respect of bank deposits and also in respect of payments which exceeded ₹ 20,000/- and simply accepted the return filed by the assessee. We also find that the CIT has correctly set aside the order of the AO and directed to redo the assessment as the AO has not made any enquiry and no details were called for, but, simply accepted the return filed by the assessee. When the Bench has specially pointed out to the ld. AR of the assessee that any questionnaire issued or any details were called for by the AO during the course of assessment, the AR submitted that no such questionnaire and details were called for by the AO. Therefore, we are inclined to accept the action of the CIT in exercising his power u/s 263 in setting aside the order of the AO passed u/s 143(3) and directed to redo the assessment. Accordingly, we uphold the order of the CIT and dismiss the grounds raised by the assessee. Addition u/s 40A - AO made addition as the assessee has made the payments by way of cash exceeding ₹ 20,000/- - Held that - Before the CIT(A), the assessee in his written submissions stated that he has incurred diesel expenses of ₹ 12,71,116/- during the year under consideration and not ₹ 3,17,.825/- as stated by the AO. The CIT(A) without examining the record, deleted the addition. We find that in the paper book at pages 49 to 53, as pointed out by the ld. DR, there are certain payments, which exceeded ₹ 20,000/-. However, the amount mentioned by the AO and the amount mentioned by the ld. DR are not matching and there is a difference in the total amount. Thus, we set aside the order passed by the CIT(A) and remit the matter back to the file of the AO with a direction to examine the ledger account of the assessee and, if, he found any violation by the assessee in making the cash payments exceeding ₹ 20,000/-, invoke the provisions of section 40A(3) and decide the issue in accordance with law.

Summary

Issues:
1. Validity of assessment order under section 263 of the Income Tax Act, 1961.
2. Treatment of cash deposits and disallowance of expenses under section 40A(3).

Issue 1: Validity of assessment order under section 263 of the Income Tax Act, 1961:
The case involved an appeal against the order of the Commissioner of Income Tax (CIT) under section 263 for the assessment year 2009-10. The CIT found the assessment made by the Assessing Officer (AO) under section 143(3) to be erroneous and prejudicial to the revenue's interests due to lack of proper examination of bank accounts and payments exceeding a specified amount. The CIT issued a notice under section 263, directing the AO to re-do the assessment. The assessee contended that the AO had conducted necessary inquiries before passing the order under section 143(3), while the Revenue argued that the AO had accepted the return without proper inquiry. The Income Tax Appellate Tribunal (ITAT) upheld the CIT's order, emphasizing that the AO had not made any inquiries or called for details but merely accepted the return. The ITAT concluded that the CIT was justified in setting aside the assessment and directing a re-assessment.

Issue 2: Treatment of cash deposits and disallowance of expenses under section 40A(3):
In another set of appeals, the AO had treated cash deposits in a bank account and disallowed certain expenses under section 40A(3) for the assessment year 2009-10. The CIT(A) confirmed the additions made by the AO regarding cash deposits but deleted the disallowance of expenses under section 40A(3). The ITAT remitted the issue of cash deposits back to the AO for detailed examination to determine ownership, directing the assessee to provide documentary proof. Regarding the disallowance of expenses under section 40A(3), the ITAT found discrepancies in the amounts mentioned by the AO and the Revenue, leading to the matter being sent back to the AO for re-examination based on ledger accounts. The ITAT also addressed the maintainability of the Revenue's appeal based on the amount involved, citing an exception under a CBDT circular due to audit objections. Ultimately, the ITAT allowed the appeals related to these issues for statistical purposes.

In conclusion, the ITAT dismissed one appeal while allowing the others for statistical purposes, emphasizing the need for proper examination and compliance with legal provisions in assessments and expense disallowances under the Income Tax Act, 1961.