2020 (3) TMI 329 - AT - Income Tax

Revision u/s 263 - undisclosed receipts and value the opening stock and closing stock of iron ore and dump workings - HELD THAT - Unanimous view that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order erroneous. Assessee has neither disputed the correctness of the above decision nor brought to our knowledge any contrary decision on this point, but he claimed that the A.O. made proper enquiry. Whether the A.O. has made the requisite enquiries ? - It is undisputed that during the accounting year relevant to assessment year under consideration, the assessee has credited ₹ 167,58,34,770/- under the head revenue from operations (gross) i.e. (gross sale of ₹ 196,76,82,602 less royalty of ₹ 29,18,47,831). Pr. CIT gathered from Form H1 prescribed to Indian Bureau of Mines that the assessee had effected total sale of 940,788.270 (MT) of iron ore for a sum of ₹ 202,42,11,422/- and as such gross revenue from operation has been worked out to ₹ 173,23, 63,591 i.e. (gross sale of ₹ 202,42,11,422 less royalty of ₹ 29,18,47,831). The above discrepancies were not pointed out by the Assessing Officer at the time of assessment proceedings. Pr. CIT after making proper enquiry pointed out that that the assessee company had understated its revenue from operations to the extent of ₹ 5,65,28,821 (₹ 173,23,63,591 ₹ 167,58,34,770/-. We, therefore, are in agreement with the learned Pr. Commissioner of Income tax that the assessment order was erroneous in so far as it was prejudicial to the interests of revenue. Accordingly, we decline to interfere with the order of learned Commissioner passed under section 263 of the Act. - Decided against assessee.

Summary

Issues:
1. Invocation of provisions of section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT).
2. Alleged understatement of revenue from operations by the assessee.
3. Discrepancies in the valuation of opening and closing stock of iron ore by the assessee.
4. Failure of the Assessing Officer (AO) to make requisite inquiries leading to an erroneous assessment order.

Analysis:
1. The appeal was filed against the Pr. CIT(A)'s order under section 263 of the Income Tax Act, 1961 for the assessment year 2014-15. The Pr. CIT identified discrepancies in the assessee's revenue from operations and stock valuation.

2. The Pr. CIT found that the assessee had understated its revenue from operations by &8377; 5,65,28,821, as revealed through scrutiny of Form H1 and assessment records. The AO failed to bring these undisclosed receipts to tax, leading to an erroneous assessment order.

3. Additionally, discrepancies were noted in the valuation of opening and closing stock of iron ore by the assessee. The Pr. CIT observed that the stock figures submitted to the Indian Bureau of Mines did not align with the figures in the profit and loss account, indicating concealment and rendering the assessment prejudicial to revenue interests.

4. The Pr. CIT invoked his powers under section 263 based on the failure of the AO to conduct necessary inquiries. The ITAT upheld the Pr. CIT's decision, citing various legal precedents emphasizing the duty of the AO to investigate and ascertain the truth of facts stated in the return. The ITAT concluded that the assessment order was indeed erroneous and prejudicial to revenue interests due to the lack of proper inquiry by the AO.

5. The ITAT's decision was supported by legal principles highlighting the AO's role as both an adjudicator and an investigator. The failure to make necessary inquiries in circumstances warranting investigation renders the assessment order erroneous. The ITAT, therefore, dismissed the appeal, upholding the Pr. CIT's decision under section 263 of the Act.

This detailed analysis of the judgment provides insights into the issues raised, the findings of the authorities, and the legal principles governing the assessment process under the Income Tax Act, 1961.