2021 (10) TMI 1056 - AT - Income Tax

Revision u/s 263 by CIT - Low net profit or loss shown from large gross receipts - HELD THAT - As in the present case, we have examined in reference to the shortcomings in the assessment order as alleged by the Ld. Pr. Commissioner of Income Tax the assessee had demonstrated each and every aspect of such queries raised before the Assessing Officer. DR also could not refute the fact that necessary documents were placed before the AO and he also could not bring on record any material/evidence to show that the Assessing Officer has not conducted any enquiry. Rather, we have observed that questions were asked and in response thereto, the assessee had given reply to each and every queries raised by the Department. It is a settled position of law while assuming jurisdiction u/s.263 of the Act, the Ld. Pr. Commissioner of Income Tax should specifically state the reasons why the order of the Assessing Officer was erroneous in so far as prejudicial to the interest of the revenue by supporting factual evidences and reasoning which in this case is absent. Thus we hold that resorting to revisionary jurisdiction u/s.263 of the Act by the Ld. Pr. Commissioner of Income Tax in this case is not valid in law and hence, we quash the impugned order of the Ld. Pr. Commissioner of Income Tax. - Assessee appeal allowed.

Issues Involved:
1. Assumption of revisionary jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Examination of foreign exchange loss and its impact on net profit.
3. Verification of domestic transactions and expenses.
4. Payments to related parties and their scrutiny.
5. Applicability of Vivad se Vishwas Act, 2020, on the assessment order.

Detailed Analysis:

1. Assumption of Revisionary Jurisdiction under Section 263 of the Income Tax Act, 1961:
The primary grievance of the assessee revolves around the Ld. Pr. Commissioner of Income Tax's assumption of revisionary jurisdiction under Section 263 of the Income Tax Act, 1961. The Commissioner held that the assessment order was erroneous and prejudicial to the interest of the revenue due to the Assessing Officer's failure to conduct proper enquiry and verification on various aspects of the matter.

2. Examination of Foreign Exchange Loss and its Impact on Net Profit:
The Commissioner observed that the case was selected due to "low net profit or loss shown from large gross receipts." The Assessing Officer did not question the significant increase in foreign exchange loss, which escalated from ?82,23,143 to ?82,83,74,234. The assessee had provided detailed explanations and documents regarding the foreign exchange loss to the Assessing Officer, which were annexed in the paper book. The Tribunal noted that these details were indeed examined by the Assessing Officer, and the Department's contention that no enquiry was conducted was incorrect.

3. Verification of Domestic Transactions and Expenses:
The Commissioner noted that the Assessing Officer did not correctly examine the expenses of domestic transactions, which contributed to the reduced net profit. However, the Tribunal found that the assessee had provided comprehensive explanations and documents during the assessment proceedings. The Tribunal emphasized that the Assessing Officer made sufficient enquiries, and the assessee responded with detailed explanations regarding the increase in foreign exchange loss and the decrease in net profit.

4. Payments to Related Parties and Their Scrutiny:
The Commissioner highlighted payments made to Viraj Enterprises and Gestamp Global Tooling, alleging that the Assessing Officer did not make any enquiries regarding these transactions. The Tribunal found that the assessee had furnished explanations and documents regarding these payments during the assessment proceedings. Specifically, the payment to Gestamp Global Tooling was ?1.027 crores, not ?3.447 crores as alleged. The Tribunal concluded that these payments were scrutinized, and the Assessing Officer's order was not erroneous or prejudicial to the interest of the revenue.

5. Applicability of Vivad se Vishwas Act, 2020, on the Assessment Order:
The Commissioner noted that the assessee filed Form No. 4 under the Vivad se Vishwas Act, 2020, and held that the scheme provided immunity only for verified issues. The Tribunal found this reasoning incomprehensible, stating that availing the benefit of the scheme post-assessment could not render the assessment order erroneous and prejudicial to the interest of the revenue.

Conclusion:
The Tribunal held that the Ld. Pr. Commissioner of Income Tax did not provide specific reasons supported by factual evidence to justify the assumption of revisionary jurisdiction under Section 263. The Tribunal emphasized that the Assessing Officer conducted sufficient enquiries, and the assessee provided detailed explanations and documents. Consequently, the Tribunal quashed the impugned order of the Ld. Pr. Commissioner of Income Tax and allowed the appeal of the assessee. The order was pronounced on the 20th day of October, 2021.

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