2017 (8) TMI 228 - AT - Income Tax

Revision u/s 263 - Payment made to M/s. Tahir Engineering Works - Held that - In appeal before the ld CIT it has been categorically held by the ld CIT in his order dated 04.08.2015 that the addition made by the AO merely on the basis of conjectures and surmises. He held so because of the reason that the assessee has got job work done through M/s. Tahir Engineering Works for 620000/-. The assessee submitted the complete details with respect to payment made to M/s.Tahir Engineering Works for 620000/- with exhaustive details and therefore the addition was deleted. The ld DR could not confront the fact that the order of CIT has not been further agitated before higher forum by the revenue. Hence on this ground it cannot be said that order of the AO is erroneous and prejudicial to the interest of the assessee. Addition u/s 68 - lack of enquiry v/s no enquiry - Held that - As found that before the ld AO the assessee filed the confirmation of the Modern Chemicals stating PAN amount of outstanding as on 31.03.2008 of 1367088/-. Such confirmation is placed at Page 138 of the Paper Book dated 02.06.2010 identically with M/s. Paswara Chemicals Ltd also the assessee submitted the confirmation stating its PAN No. Therefore there is definitely an inquiry made by the ld AO with respect to outstanding creditors. Therefore it cannot be said that it is a case of no enquiry by the AO and further when the confirmation is filed the AO has not asked for the account of that particular party therefore it can be said to be a case of inadequate enquiry but not at all a case of no enquiry. Decided in favour of assessee.

Summary

Issues involved:
1. Jurisdiction of CIT under section 263 of the Income Tax Act, 1961.
2. Erroneous and prejudicial nature of the original assessment order.
3. Adequacy of enquiries conducted by the Assessing Officer.

Issue 1: Jurisdiction of CIT under section 263 of the Income Tax Act, 1961:
The appeal was against the order of the ld CIT (A) dated 21.03.2013 for the Assessment Year 2008-09. The main grievance of the assessee was that the ld CIT erred in exercising jurisdiction under section 263 as the original order passed by the ACIT was not erroneous or prejudicial to revenue's interest. The ld CIT set aside the original order citing reasons like lack of queries on increased authorized capital, insufficient investigation into fixed asset investments, and unverified outstanding creditors. The appellant argued that the original assessment was conducted after proper verification and application of mind, and the ld CIT's reliance on certain case laws was misplaced.

Issue 2: Erroneous and prejudicial nature of the original assessment order:
The ld CIT found the original assessment order erroneous and prejudicial due to various reasons. Firstly, the ld AO did not inquire about the increase in authorized capital. Secondly, the investment in fixed assets was not adequately investigated. Lastly, the treatment of outstanding creditors was deemed inappropriate. However, the appellant contended that the ld AO had accepted explanations on these issues during the original assessment. The first appellate authority had even deleted certain additions made by the ld CIT, indicating that the original order was not flawed. The ld CIT's order under section 263 was challenged based on the adequacy of the original assessment proceedings.

Issue 3: Adequacy of enquiries conducted by the Assessing Officer:
The adequacy of enquiries conducted by the Assessing Officer was a crucial aspect of the case. The appellant argued that necessary enquiries were made during the original assessment, supported by submissions, confirmations, and documents provided to the ld AO. The ld CIT's contention that heavy onus lay on the assessee to explain outstanding credits was rebuffed by the appellant, citing the submission of relevant information during the assessment proceedings. The appellant also referenced legal precedents to support the argument that even if the enquiries were inadequate, it did not warrant the ld CIT's intervention under section 263. Ultimately, the Tribunal set aside the ld CIT's order, emphasizing the importance of proper enquiries and rejecting the ld CIT's findings of inadequate investigation by the ld AO.

This detailed analysis of the judgment provides insights into the issues raised, arguments presented, and the Tribunal's decision regarding the original assessment order and the ld CIT's exercise of jurisdiction under section 263 of the Income Tax Act, 1961.