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2019 (11) TMI 1104 - AT - Income TaxRevision u/s 263 - Addition u/s 68 - CIT was of the opinion that the genuineness of the creditors remained unverified to the extent of ₹ 96,46,987/- and he was pleased to set aside the order of the AO with a direction to the AO to verify the identity and genuineness, inter-alia, of the creditors to the extent of ₹ 96,46,987/- and to pass a fresh assessment order recomputing the income - HELD THAT - We note that the main reason given by the Ld. Pr. CIT to interfere with the assessment order dated 30.12.2016, while issuing SCN proposing to initiate revisional jurisdiction was started with the assumption of fact that the AO without making enquiries and verification in respect of sundry creditors to the tune of ₹ 2,11,05,222/- (as per the Balance Sheet) has framed the assessment order and however, while concluding the Ld. Pr. CIT found that the verification need to be restricted to only ₹ 96,46,987/- after hearing the assessee during the revisional proceedings. Since the assessee had complied with the queries on the issue and filed details of sundry creditors and the AO has made enquiries in respect of the sundry creditors then in such a scenario, the ld Pr CIT in order to find that there is any fault/deficiency in the enquiry conducted by the AO while framing assessment order, then it was incumbent upon the Ld. Pr. CIT to have conducted an enquiry by himself on the issue and record his finding of fact that could show that AO order is un-sustainable in law, which he did not do. So, the AO s action/enquiry in respect of the sundry creditors cannot be held to be erroneous as well as prejudicial to the interest of the revenue. For that we rely on the order of the Hon ble Delhi High Court in the case of Pr. CIT Vs. Delhi Airport Metro Pvt. Ltd. 2017 (9) TMI 529 - DELHI HIGH COURT and, therefore, respectfully following the ratio of the Hon ble Delhi High Court and in view of the enquiry made by the AO the order passed by the Ld. Pr. CIT u/s. 263 of the Act cannot be sustained and quashed for want of jurisdiction. Appeal of the assessee is allowed.
Issues Involved:
1. Legality of the revision order under Section 263 of the Income-tax Act, 1961. 2. Adequacy of the Assessing Officer's (AO) enquiry and verification of sundry creditors during the assessment proceedings. Detailed Analysis: 1. Legality of the Revision Order under Section 263: The primary grievance of the assessee is against the revision order passed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income-tax Act, 1961. The assessee contends that the Pr. CIT did not satisfy the conditions precedent for invoking Section 263, which requires the assessment order to be both erroneous and prejudicial to the interest of the revenue. 2. Adequacy of the AO's Enquiry and Verification of Sundry Creditors: The facts reveal that the assessee, a trader in ball-bearings and motor parts, declared an income of ?13,10,980 for AY 2014-15. The case was selected for scrutiny, and the AO assessed the total income at ?45,80,880 after making an addition of ?32,69,898. The Pr. CIT found fault with the AO's assessment, particularly the lack of enquiry and verification regarding sundry creditors amounting to ?2,11,05,222 as per the balance sheet. The Pr. CIT issued a show-cause notice to the assessee and, after reviewing the reply, concluded that the AO failed to verify credits amounting to ?96,46,987. The Pr. CIT noted that the assessee could not produce evidence regarding the identity and genuineness of these creditors during the revision proceedings and set aside the AO's order, directing a fresh assessment to verify these creditors. Arguments and Findings: The assessee argued that the AO had indeed conducted enquiries during the assessment proceedings. The AO had issued notices under Sections 142(1) and 133(6) and verified the sundry creditors on a test-check basis. The Pr. CIT, however, did not contradict these assertions but maintained that the AO's failure to verify credits of ?96,46,987 rendered the assessment order erroneous and prejudicial to the revenue. Citing a similar case from the Delhi Tribunal (Sandeep Kr. Aggarwal Vs. ITO) and the Delhi High Court’s decision in Pr. CIT Vs. Delhi Airport Metro Pvt. Ltd., the assessee contended that the AO's enquiries were adequate. The Delhi High Court held that if the AO has made enquiries and the CIT has not conducted any further enquiry to establish an error, the assessment order cannot be termed erroneous. The Tribunal noted that the AO had dual roles as an investigator and adjudicator and had fulfilled these roles by conducting enquiries and verifying sundry creditors. The Tribunal emphasized that the Pr. CIT did not conduct any independent enquiry to disprove the AO's findings. Therefore, the AO's assessment could not be considered erroneous or prejudicial to the revenue. Conclusion: The Tribunal concluded that the AO had conducted sufficient enquiries regarding the sundry creditors and that the Pr. CIT did not provide evidence to show that the AO's findings were unsustainable. The Tribunal held that the Pr. CIT's order under Section 263 was not justified and quashed it for lack of jurisdiction. Outcome: The appeal of the assessee was allowed, and the revision order under Section 263 was quashed. The Tribunal emphasized that the AO's enquiries were adequate and the Pr. CIT did not establish any error in the AO's assessment. Order Pronouncement: The order was pronounced in the open court on 22nd November 2019.
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