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2020 (1) TMI 783 - AT - Income TaxRevision u/s 263 - claim of the assessee on issues relating to VAT Refund and Terminal Excise Duty Refund was accepted by AO without making any inquiry - HELD THAT - As demonstrated by the assessee at the time of hearing before us on the basis of the letter issued by the AO and the reply filed by the assessee during the course of assessment proceedings, the inquiry on the issue of VAT Refund was specifically made by the AO and after having satisfied himself with the submission made by the assessee explaining the accounting of VAT Refund, which was duly verified by him from the books of account produced by the assessee, the claim of the assessee for VAT Refund was accepted by the Assessing Officer. On this issue, it was thus not a case of lack of inquiry or lack of proper and sufficient inquiry by the Assessing Officer as alleged by the ld. Principal CIT in his impugned order and this position is not disputed even by the ld. D.R. at the time of hearing before us. Issue relating to the assessee s claim for Terminal Excise Duty Refund was accepted by the AO in the assessment completed under section 143(3) without making any inquiry, which was warranted in the facts and circumstances of the case and this lack of inquiry on the part of the Assessing Officer, in our opinion, made his order passed under section 143(3) erroneous as well as prejudicial to the interest of the Revenue as rightly held by the ld. Principal CIT. The very fact that the assessment was made by the Assessing Officer without proper and sufficient inquiries, as warranted in the facts and circumstances of the case, makes it erroneous and also causes prejudice to the interest of the revenue giving jurisdiction to the ld. Principal CIT under section 263 to revise the same. As already noted, the claim of the assessee for the Terminal Excise Duty Refund in the present case was accepted by the Assessing Officer without making any inquiry whatsoever and such lack of inquiry made his order passed under section 143(3) on this issue erroneous as well as prejudicial to the interest of the Revenue. We accordingly uphold the impugned order passed by the ld. Principal CIT under section 263 setting aside the order of the Assessing Officer only on the issue relating to Terminal Excise Duty Refund and allow partly this appeal of the assessee. - Decided partly in favour of assessee.
Issues Involved:
1. Alleged underassessment of income due to excess credit of VAT refund receivable. 2. Alleged underassessment of income due to Terminal Excise Duty refund receivable. Detailed Analysis: 1. Alleged Underassessment of Income Due to Excess Credit of VAT Refund Receivable: The Principal Commissioner of Income Tax (CIT) identified an error in the assessment order passed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act, 1961. The issue was related to the VAT refund receivable amounting to ?5,94,33,275 as on 31.03.2013, which increased by ?1,67,16,017 from the previous year. The assessee had claimed a deduction of ?1,36,96,051 for VAT refunds, resulting in an excess credit of ?30,19,963. The CIT contended that this excess credit led to an underassessment of total income by ?30,19,963. In response, the assessee argued that the VAT refund receivable was an expenditure on account of Input VAT paid on purchases, not included in the cost of purchases debited to the profit & loss account. The assessee maintained that the entire amount was treated as an asset and not as income. The CIT, however, rejected this explanation, stating that the AO failed to conduct proper inquiries into the matter, making the assessment erroneous and prejudicial to the interest of the revenue. 2. Alleged Underassessment of Income Due to Terminal Excise Duty Refund Receivable: The CIT also identified an increase in Terminal Excise Duty refund receivable by ?70,63,536 without any corresponding credit entry in the profit & loss account, resulting in an underassessment of total income by ?70,63,536. The assessee explained that the amount represented excise duty paid on exported goods, which was refundable and not considered as expenditure in the profit & loss account. The CIT found this explanation unsatisfactory, asserting that the AO did not make necessary inquiries into the matter. The Tribunal noted that the AO had raised specific queries regarding the VAT refund during the assessment proceedings, and the assessee had provided satisfactory explanations, which were verified from the books of account. Therefore, it was not a case of lack of inquiry by the AO on the issue of VAT refund. However, regarding the Terminal Excise Duty refund, the Tribunal observed that there was no evidence of any inquiry made by the AO. The lack of inquiry rendered the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal upheld the CIT’s order to set aside the assessment on this issue, directing the AO to reframe the assessment after proper inquiry. Conclusion: The Tribunal concluded that the assessment order was partly erroneous and prejudicial to the interest of the revenue due to the lack of inquiry by the AO on the issue of Terminal Excise Duty refund. The appeal of the assessee was partly allowed, and the AO was directed to reframe the assessment concerning the Terminal Excise Duty refund after conducting proper inquiries. The Tribunal upheld the CIT’s order to this extent and allowed the appeal partly. Order Pronounced: The order was pronounced in the open Court on January 17, 2020.
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