9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 973 - AT - Income TaxRevision u/s 263 - sufficient, adequate and proper enquiry on certain points made by AO or not - HELD THAT - JCIT Range-2, Sambalpur prepared a proposal for revisional proceedings u/s.263 and ld ACIT, Sambalpur in the order sheet dated 14.1.2019 created an explanation from the AO that the AO should have asked the assessee produce documentary evidence related to its business like bills and vouchers, details of documents of sale of flats but the assessee failed to submit the same before the AO during the scrutiny assessment. Therefore, he alleged that in real estate business with high closing stock, the information about estimated cost of construction of the project, estimated sale value of the project, selling price of individual flats, period of construction etc should have been examined before completion of scrutiny assessment but the ld ACIT failed to consider that it was a case of limited scrutiny only on two points and from the assessment order dated 21.3.2017, it is clearly discernible that the AO has made enquiry and deliberation on both the points and as per CBDT Circulars (supra), he is not allowed to travel beyond the ambit of the points for which, case was selected for limited scrutiny. ACIT, who was not having revisional power u/s.263 wrongly alleged that the AO has not made enquiry on certain points. Therefore, we are unable to agree with the conclusions drawn by ld PCIT in paras 10 11 of the impugned order and hold that the assessment order is neither erroneous nor prejudicial to the interests of the revenue and the AO has made sufficient enquiries, investigations and examination on both the points. Consequently, the revisional proceedings, issue of notice and impugned order u/s.263 of the Act is quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of the Principal Commissioner of Income Tax (Pr. CIT) exercising powers under section 263 of the Income Tax Act, 1961. 2. Adequacy of the Assessing Officer's (AO) scrutiny and assessment procedures. 3. Application of mind by the Pr. CIT in initiating revisional proceedings under section 263. 4. Compliance with CBDT instructions on limited scrutiny. Detailed Analysis: 1. Validity of the Pr. CIT Exercising Powers under Section 263: The primary issue is whether the Pr. CIT's exercise of powers under section 263 to set aside the AO's assessment order was within the legal scope. The Pr. CIT observed that the AO had not adequately verified several aspects, such as the net sales of flats, the genuineness of advances from customers, and discrepancies in sales turnover. The Tribunal found that the Pr. CIT failed to apply his mind independently and relied solely on the proposal and draft notice prepared by the AO, which is not permissible under section 263. The Tribunal concluded that the initiation of revisional proceedings was void ab initio and bad in law. 2. Adequacy of the AO's Scrutiny and Assessment Procedures: The AO conducted a limited scrutiny on two points: (i) real estate business with high closing stock, and (ii) mismatch in sales turnover reported in the audit report and ITR. The AO issued statutory notices and received responses from the assessee, which included books of account and other relevant documents. The Tribunal noted that the AO had made sufficient, adequate, and proper inquiries into both points, leading to a logical conclusion in the assessment order. Therefore, the Tribunal held that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. 3. Application of Mind by the Pr. CIT in Initiating Revisional Proceedings: The Tribunal scrutinized the process followed by the Pr. CIT in initiating revisional proceedings under section 263. It was found that the Pr. CIT had merely approved the proposal and draft notice prepared by the AO without independently examining the assessment records. The Tribunal emphasized that section 263 mandates the Pr. CIT to call for and examine the assessment records and apply his mind before initiating revisional proceedings. The failure to do so rendered the revisional proceedings unsustainable. 4. Compliance with CBDT Instructions on Limited Scrutiny: The Tribunal referred to CBDT Instruction No. 5/2016, which restricts the scope of inquiry in limited scrutiny cases to the specific reasons for which the case was selected. The AO is not permitted to expand the scope without prior approval from higher authorities. The Tribunal noted that the AO adhered to these instructions by confining the scrutiny to the designated issues. The Pr. CIT's contention that the AO failed to verify additional aspects was found to be beyond the permissible scope of limited scrutiny. Conclusion: The Tribunal concluded that the AO had conducted sufficient inquiries and that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Pr. CIT's initiation of revisional proceedings under section 263 was deemed invalid due to the lack of independent application of mind and non-compliance with procedural mandates. Consequently, the revisional proceedings, notice, and impugned order under section 263 were quashed, and the appeal of the assessee was allowed.
|
