2020 (3) TMI 206 - AT - Income Tax

Revision u/s 263 - Pr.CIT has held that the order of the AO as erroneous insofar prejudicial to the interest of Revenue on account of non-verification of some items - HELD THAT - After perusal of the details of the fixed assets which were available before the AO during the assessment proceedings, we find that the AO after due application of mind framed the assessment under section 143(3) of the Act. Similarly, we note regarding the proceeds from deposits and cash credit i.e. unsecured loans, that the AO during the assessment proceedings has required the assessee to furnish the details in the notice issued under section 142(1) of the Act dated 22-10-2012. We also find that the assessee in response to the above notice has filed the details of the unsecured loan as well as confirmations. Similarly, we note, regarding the transactions covered under section 40A(2)(b) of the Act assessee in response to the queries raised in the course of hearing has submitted vide letter dated 06/03/2013 that the transactions were carried out with the related parties at the prevailing market rate. We hold that the assessment order was framed under section 143(3) of the Act after due verification by the AO. Accordingly, we are of the view that the order of the AO cannot be held as erroneous insofar prejudicial to the interest of Revenue on account of non-verification of the facts as stated above. We conclude that the assessment was framed by the AO after considering the various details filed by the assessee. Therefore, we are not inclined to uphold the finding of the learned ld. Pr.CIT with respect to the items as discussed above. Accordingly, we quash the order passed by the Ld. Pr.CIT under section 263.

Summary

Issues Involved:
1. Invocation of provisions of section 263 of the Income Tax Act.
2. Non-verification of fixed assets and depreciation.
3. Non-verification of proceeds from deposits, transactions under section 40A(2)(b), cash credits, and current liabilities.

Detailed Analysis:

1. Invocation of Provisions of Section 263:
The primary issue raised by the assessee is that the Pr. CIT erred in invoking section 263 of the Act, holding the assessment framed under section 143(3) as erroneous and prejudicial to the interest of revenue. The Pr. CIT directed the AO to revise the order based on the belief that it was erroneous and prejudicial to the interest of revenue. The assessee argued that the AO had already examined the issues, and the alleged inadequate inquiry could not be grounds for invoking section 263.

2. Non-verification of Fixed Assets and Depreciation:
The Pr. CIT observed that the auditor had mentioned the company management did not carry out physical verification of fixed assets, and the AO failed to verify this during the assessment proceedings. The assessee contended that details of fixed assets were disclosed in the tax auditor's report, and the AO had inquired about these details in the notice dated 22-10-2012. The assessee had provided the necessary details in response to the notice, and the AO had framed the assessment after due verification.

3. Non-verification of Proceeds from Deposits, Transactions under Section 40A(2)(b), Cash Credits, and Current Liabilities:
The Pr. CIT identified several items that were allegedly not adequately verified by the AO, including proceeds from deposits, transactions with related parties under section 40A(2)(b), cash credits, and current liabilities. The assessee argued that all necessary details were submitted during the assessment proceedings, including confirmations for unsecured loans, details of transactions with related parties, and lists of current liabilities. The AO had required these details in notices issued under section 142(1), and the assessee had duly complied.

Tribunal's Findings:

Invocation of Section 263:
The Tribunal noted that the AO had issued detailed notices requiring information on various aspects, including fixed assets, unsecured loans, transactions under section 40A(2)(b), and current liabilities. The assessee had provided comprehensive responses and supporting documents, which the AO had considered before framing the assessment. The Tribunal held that the assessment order could not be deemed erroneous and prejudicial to the interest of revenue merely because the Pr. CIT disagreed with the AO's conclusions.

Non-verification of Fixed Assets and Depreciation:
The Tribunal found that the AO had requested details of fixed assets, and the assessee had provided the necessary information, including descriptions, dates, and values of assets. The AO had examined these details, and the assessment was framed after due application of mind. Therefore, the Tribunal concluded that the AO had conducted adequate verification.

Non-verification of Proceeds from Deposits, Transactions under Section 40A(2)(b), Cash Credits, and Current Liabilities:
The Tribunal observed that the AO had required detailed information on unsecured loans, transactions with related parties, and current liabilities. The assessee had submitted the requisite details and confirmations, which the AO had reviewed. The Tribunal held that the AO had conducted proper inquiries and that the assessment order was not erroneous or prejudicial to the interest of revenue.

Conclusion:
The Tribunal quashed the order passed by the Pr. CIT under section 263 to the extent of the items discussed above. The appeal of the assessee was partly allowed, and the assessment order framed under section 143(3) was upheld as not erroneous or prejudicial to the interest of revenue. The Tribunal emphasized that section 263 could not be invoked to correct every mistake or error, and the AO's view, if reasonable and based on adequate inquiries, should not be overturned merely because the Pr. CIT had a different opinion.