2021 (10) TMI 1000 - AT - Income Tax

Revision u/s 263 by CIT - Whether non-enquiry also renders a particular order passed by the lower authorities as erroneous and prejudicial to the interest of Revenue? - HELD THAT - The order passed by the ld. Assessing Officer does not suggest that non-reflection of working progress of ₹ 20,20,000/- in assets side of the balance sheet as on 31.03.2010 has been considered by the ld. Assessing Officer in its proper perspective. The clarification given by the assessee in support of his case, on this issue, before the ld. PCIT neither seems to be enquired nor explained by the assessee before the AO; no such deliberation is seen in the order passed by the ld. Assessing Officer. The order passed by the ld. Assessing Officer while completing the reassessment u/s 143(3) r.w. section 147, neither suggests that any such enquiry on the proposed disallowance u/s 14A of the Act as raised by the ld. PCIT has been made. If the proof of such enquiry is not reflecting in the order passed by the ld. Assessing Officer which ought to have been done by him at the time of reassessment, requirement of further enquiries/verifications u/s 263 of the Act, in our considered view, cannot be brushed aside. Thus the order passed by the ld. PCIT in setting aside the order of reassessment dated 18.12.2017 and in directing the ld. Assessing Officer to frame the assessment afresh, in our considered opinion, is without any ambiguity so as to warrant interference, hence we confirm the same. The assessee s appeal is thus dismissed.

Summary

Issues:
1. Delay in filing the appeal due to lockdown.
2. Non-disclosure of work-in-progress in the balance sheet.
3. Disallowance of expenses under section 14A of the Income Tax Act.
4. Escaped assessment of income.

Analysis:
1. Delay in filing the appeal: The appeal was filed with a delay of 34 days due to the lockdown declared in March 2020. The Appellant explained the delay, attributing it to the lockdown preventing timely filing. The Tribunal, considering the circumstances, condoned the delay as genuine and justified, noting that the Respondent did not object to the plea.

2. Non-disclosure of work-in-progress: The Principal Commissioner of Income Tax (PCIT) found discrepancies in the balance sheet where work-in-progress of ?20,20,000 was not reflected, leading to an undisclosed asset. The PCIT deemed the assessment order erroneous and prejudicial to revenue, directing a fresh assessment by the Assessing Officer.

3. Disallowance of expenses under section 14A: The PCIT observed discrepancies in investments, interest expenses, and exempted income in the balance sheet. This led to a proposed disallowance of expenses under section 14A of the Act. The Assessing Officer did not address this issue, prompting the PCIT to issue a show-cause notice to the Assessee.

4. Escaped assessment of income: The Assessing Officer's order did not reflect proper consideration of the work-in-progress issue or the proposed disallowance under section 14A. The Tribunal noted that failure to conduct necessary enquiries or verifications, as highlighted by the PCIT, rendered the order erroneous and prejudicial to revenue. Citing legal precedents, the Tribunal upheld the PCIT's decision to set aside the reassessment order and directed a fresh assessment.

In conclusion, the Tribunal dismissed the Assessee's appeal, affirming the PCIT's directive for a fresh assessment. The judgment emphasized the importance of thorough assessments and proper consideration of all relevant issues to prevent errors and uphold the interests of revenue.