9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (8) TMI 174 - AT - Income TaxRevision u/s 263 - addition u/s 40A(3) - Held that - It is an admitted fact that notice u/s 263 of the Act does not contain any such violation. However, in the order passed u/s 263 of the Act, the ld. CIT has considered this possible violation on the part of the assessee as one of the ground for cancelling the assessment by invoking power u/s 263 of the Act. It is held in various decisions that an order u/s 263 of the Act passed on the ground not taken in notice as invalid. Since the assessee in the instant case has filed adequate details regarding sundry creditors and the A.O after examining such details has accepted such sundry creditors as genuine, therefore, merely because the A.O has not conducted enquiry in a particular way as per the desire of the ld. CIT cannot be a ground to invoke jurisdiction u/s 263 of the Act. This is a case of inadequate enquiry, but it cannot be said that no enquiry has been conducted by the A.O. In this view of the matter, we are of the considered opinion that the ld. CIT was not justified in invoking the provisions of section 263 of the Act. Thus we set aside the order passed u/s 263 of the Act by the ld. CIT and grounds raised by the assessee are allowed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income-tax Act. 2. Verification of sundry creditors. 3. Discrepancy in the capital account. 4. Violation of Section 40A(3) of the Income-tax Act. 5. Adequate opportunity of hearing and principles of natural justice. 6. Basis for action under Section 263. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income-tax Act: The appeal challenges the order passed under Section 263 of the Income-tax Act by the CIT, Dehradun, which revised the assessment order for the A.Y. 2009-10. The assessee contended that the order was barred by limitation, illegal, without jurisdiction, and contrary to law and facts, thus deserving to be quashed. The CIT invoked jurisdiction under Section 263 on two grounds: non-verification of sundry creditors and discrepancy in the capital account. 2. Verification of Sundry Creditors: The CIT observed that the AO did not verify all sundry creditors amounting to ?4,77,66,341/- shown outstanding at the end of the F.Y. The AO issued notices under Section 133(6) only to six out of 22 creditors. The CIT held that the AO failed to examine/investigate every aspect of the case during the assessment proceedings, making the assessment order erroneous and prejudicial to the interest of the Revenue. The assessee argued that the AO conducted a thorough enquiry and provided details of sundry creditors, which the AO accepted as genuine. The Tribunal found that the AO had issued notices and received replies from creditors, indicating that some enquiry was conducted, although the CIT deemed it inadequate. 3. Discrepancy in the Capital Account: The CIT initially raised concerns about discrepancies in the capital account of the assessee in the books of M/s Shree Balaji Enterprises and M/s Kundan Tent House. However, the CIT accepted the assessee's explanation regarding the transfer of funds between the two proprietary concerns, as no balance remained outstanding at the end of the year. This issue was not further discussed in the CIT's order, implying acceptance of the assessee's explanation. 4. Violation of Section 40A(3) of the Income-tax Act: The CIT noted that the assessee made cash payments below ?20,000/- to certain parties, totaling ?25,10,790/- and ?6,57,250/-, respectively, which violated Section 40A(3) of the Act. The AO did not verify these payments for compliance with Section 40A(3). The assessee argued that the issue of cash payments was not mentioned in the notice under Section 263, and thus, raising it in the CIT's order violated principles of natural justice. The Tribunal agreed that the CIT could not introduce new grounds not mentioned in the notice under Section 263. 5. Adequate Opportunity of Hearing and Principles of Natural Justice: The assessee contended that the CIT's order was bad in law as no adequate opportunity of hearing was granted, violating the principles of natural justice. The Tribunal noted that the CIT must provide an opportunity of hearing and cannot raise new issues not mentioned in the notice under Section 263. The Tribunal found merit in the assessee's argument that the CIT's order violated principles of natural justice by introducing the issue of Section 40A(3) without prior notice. 6. Basis for Action under Section 263: The Tribunal emphasized the distinction between "no enquiry" and "inadequate enquiry." The CIT can assume jurisdiction under Section 263 only when there is absolutely no enquiry on any issue. In this case, the AO conducted some enquiry, though the CIT deemed it inadequate. The Tribunal held that merely because the AO did not conduct the enquiry in a particular way as per the CIT's satisfaction does not justify invoking Section 263. The Tribunal cited various judicial precedents supporting the view that inadequate enquiry does not empower the CIT to invoke Section 263. Conclusion: The Tribunal concluded that the AO made adequate enquiries to his satisfaction, and the CIT was not justified in invoking Section 263. The Tribunal set aside the order passed under Section 263 by the CIT and allowed the grounds raised by the assessee. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 13.04.2017.
|
