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2019 (12) TMI 263 - AT - Income TaxRevision u/s 263 - scope of SCN issued for revision order - whether the AO has applied the mind after making inquiry - The charge of the ld.Commissioner is that the assessment order is erroneous because the AO failed to examine certain material viz. outcome of the survey; details reflected in NSEL data base; report of S TA and thus, such assessment order has caused prejudice to the interest of the revenue, and therefore, it deserves to be set aside. - CIT in the order u/s 263 directed the AO to reframe the assessment orders after conducting inquiries. Held that - ld.Commissioner has merely raised suspicion on the basis of certain information which were already in the knowledge of the AO, not only in this assessment year, but in earlier assessment years. The ld.Commissioner has not conclusively recorded any finding as to what is the ultimate impact of this information on the assessability of these appellants, and how non-consideration of this made the assessment order as erroneous. The AO has taken note of all these things, because these very materials were available in the immediately preceding year. The only addition made and confirmed by the ld.CIT(A) in the Asstt.Year 2013-14 has been struck down. Thus, the ld.Commissioner ought to have looked into order of the ITAT, and thereafter, analysed the details, whether any income has escaped on account of failure of the AO to conduct adequate inquiry (in the opinion of CIT). The ld.Commissioner nowhere made out that case. Therefore, as far as first compartment of show cause notice is concerned, we are of the view that the ld.Commission failed to point out any reasons which can suggest that the assessment orders are erroneous. The materials referred by him are superficial, which at the most can rise a suspicion only. No firm conclusion can be drawn nor support the stand taken by the ld.Commissioner. Regarding the second compartment of the show cause notice - Held that - We have minutely examined each and every reason assigned by the ld.Commissioner under serial no.VI of the reasons given by him in the show cause notice. It is discernible that all these details were submitted before the AO during the course of assessment proceedings. The assessment proceedings continued for almost more than eight to nine months, and the accounts were provided before the AO. The ld.Commissioner just made narrations in the show cause notice, but has not conducted any inquiry, and has not held how assessment order is erroneous by pointing out short-comings of these accounting entries. Had an elaborate discussion available, then that would be an ideal situation for the higher appellate authorities to appreciate, what has operated in the mind of the AO while passing the assessment. But in the absence of such discussion, it has to be ascertained from the questionnaire and the replies submitted by the assessee. Explanation -2 can be invoked when no inquiry was conducted by the AO Revision order quashed.
Issues Involved:
1. Legality of the Commissioner’s action under Section 263 of the Income Tax Act, 1961. 2. Examination of the assessment orders passed under Section 143(3) of the Act. 3. Adequacy of inquiries and verification conducted by the Assessing Officer (AO). 4. Impact of the National Spot Exchange Ltd. (NSEL) data and survey findings on the assessment. 5. Consideration of the report by Sharp and Tannan Associates (S&TA). 6. Examination of outstanding advances, trade payables, and stock details. Detailed Analysis: 1. Legality of the Commissioner’s Action under Section 263 of the Income Tax Act, 1961: The Commissioner initiated proceedings under Section 263, deeming the assessment orders erroneous and prejudicial to the interests of the Revenue. Section 263 empowers the Commissioner to revise any order passed by the AO if it is erroneous and prejudicial to the Revenue. The Tribunal noted that the Commissioner must record satisfaction that the AO's order is erroneous and prejudicial to the Revenue. The Tribunal emphasized that the Commissioner must conduct an inquiry and record a finding to justify the revision, as established in the case of CIT vs. Sun Beam Auto and Gee Vee Enterprises Ltd vs. Addl. Commissioner of Income Tax. 2. Examination of the Assessment Orders Passed under Section 143(3) of the Act: The appellants contended that the AO conducted a detailed inquiry before passing the assessment orders on 30.12.2016. The Tribunal noted that the AO issued a questionnaire under Section 142(1) and scrutinized the returns, considering various details and documents provided by the appellants. The Tribunal observed that the AO’s assessment orders, although brief, were based on the information and explanations submitted by the appellants. 3. Adequacy of Inquiries and Verification Conducted by the AO: The Tribunal evaluated whether the AO conducted adequate inquiries and verification. It was noted that the AO issued detailed questionnaires and received comprehensive replies from the appellants. The AO examined the accounts, stock details, and other relevant documents. The Tribunal referred to the principles laid down in various judgments, emphasizing that if the AO made inquiries and applied his mind, the Commissioner could not substitute his judgment under Section 263. 4. Impact of the NSEL Data and Survey Findings on the Assessment: The Commissioner highlighted the NSEL data and survey findings, alleging that the appellants were involved in issuing bogus warehouse receipts and other nefarious activities. The Tribunal observed that similar issues were examined in the assessment year 2013-14, and the AO did not make any addition based on the NSEL data. The Tribunal noted that the AO had considered the survey findings and NSEL data in the previous assessment year, and no new material was presented to justify the revision under Section 263. 5. Consideration of the Report by Sharp and Tannan Associates (S&TA): The Commissioner referred to the S&TA report indicating recoverable amounts from the appellants. The Tribunal noted that the AO made additions based on the S&TA report in the assessment year 2013-14, which were subsequently deleted by the Tribunal. The Tribunal emphasized that the Commissioner did not conduct any further inquiry or collect additional material to substantiate the findings of the S&TA report. The Tribunal held that the Commissioner’s reliance on the S&TA report without further investigation was insufficient to deem the assessment orders erroneous. 6. Examination of Outstanding Advances, Trade Payables, and Stock Details: The Commissioner raised concerns about outstanding advances, trade payables, and stock details, alleging inadequate verification by the AO. The Tribunal noted that the AO issued specific questionnaires addressing these issues, and the appellants provided detailed explanations and documents. The Tribunal observed that the AO examined the advances, trade payables, and stock details, and was satisfied with the explanations provided by the appellants. The Tribunal held that the Commissioner’s allegations of inadequate inquiry were unfounded, as the AO had conducted a thorough examination of the relevant issues. Conclusion: The Tribunal concluded that the Commissioner failed to demonstrate that the assessment orders were erroneous and prejudicial to the Revenue. The Tribunal emphasized that the Commissioner did not conduct an independent inquiry or collect additional material to substantiate the allegations. The Tribunal quashed the orders passed under Section 263, allowing the appeals of the assessees and upholding the assessment orders passed by the AO.
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