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2018 (4) TMI 319 - AT - Income TaxRevision u/s 263 - AO should have examined valuation of work in progress of the assessee in a particular manner to include part of the indirect expenditure, which are attributable to the particular projects - lack of inquiry or inadequate inquiry - Held that - The assessee has only stated that in assessment year 2009 10 the issue is pending before the coordinate bench where the issue involved is the valuation of the closing stock of work in progress. Even that does not show that the assessing officer has applied is mind on to determine the cost of the work in progress according to the earlier history of the case of the assessee. Therefore, according to us there is no Inquiry made by the Ld. assessing officer about the valuation of the closing stock of work in progress. Therefore, according to us the case of the assessee falls under the category of lack of Inquiry and not even the case of inadequate Inquiry. In the present case the AO has not examined the valuation of the work in progress with respect to the components of the value of the stock, according to us that enquiry has not been made by the Ld. assessing officer which are diligent assessing officer should have made more specifically when the identical issue is litigated by the revenue. In view of this we do not find any infirmity in the order of the Ld. CIT in assuming jurisdiction under section 263 of the income tax act and holding that the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue. Accordingly, both the grounds of appeal filed by the assessee are dismissed.
Issues Involved:
1. Whether the Principal Commissioner of Income Tax (PCIT) erred in reopening the case under section 263 of the Income Tax Act. 2. Whether the PCIT was correct in allowing the jurisdictional Assessing Officer (AO) to pass an order under section 263 read with section 143(3) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Reopening the Case under Section 263: The appeal was filed against the order of the PCIT, who held the original assessment order dated 28/2/2014 as erroneous and prejudicial to the interest of revenue. The PCIT issued a show cause notice on 15/02/2016, stating that no proportionate disallowance out of indirect expenses was made in computing the work in progress for the A.Y. 2011-12. The assessee argued that the AO had considered all aspects while computing the total income under section 143(3) and that the valuation method was accepted after due verification. However, the PCIT found that the AO had not sufficiently inquired into the valuation of work in progress, particularly the inclusion of indirect expenses, and thus deemed the order erroneous due to lack of inquiry. 2. Jurisdictional Authority under Section 263 read with Section 143(3): The PCIT directed the AO to verify the correct value of work in progress, including all direct and indirect costs related to unfinished projects as of 31/3/2011. The assessee contended that the AO had already examined the issue and that the PCIT's intervention was unwarranted. They cited previous decisions, including the Bombay High Court's ruling in CIT vs. Gabriel India Ltd and the Delhi High Court's ruling in CIT vs. Sunbeam Auto Limited, which stated that section 263 should not be invoked for inadequate inquiry but only for lack of inquiry. The PCIT, however, noted that the AO had not made adequate inquiries, particularly in light of the pending issues from earlier years and the need for a detailed examination of administrative expenses. Conclusion: The tribunal upheld the PCIT's decision, stating that the AO had not made the necessary inquiries into the valuation of work in progress, particularly regarding indirect expenses. The tribunal agreed with the PCIT that the assessment order was erroneous and prejudicial to the interest of the revenue due to the lack of diligent inquiry. The tribunal dismissed the appeal, affirming the PCIT's jurisdiction under section 263 to revise the AO's order. The decision emphasized the importance of thorough and diligent inquiries by the AO, especially when similar issues have been litigated in previous assessment years.
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