9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (5) TMI 895 - AT - Income TaxRevision u/s 263 - Reliance on audit objection raised by the Audit Wing of the Department - As per CIT no due enquiry and due application of mind by the AO - increase in the valuation of stock as on the date of survey - HELD THAT - As gone through the paper book filed by the assessee wherein the assessee has sought to demonstrate with evidence that the AO had already made requisite enquiries on the issues raised by the Ld. PCIT during the course of assessment proceedings and also the assessee had duly complied with the enquiries made made by the AO by replying in details and by furnishing various documents and evidences in support of its claim. We have also gone through the surrender letter as submitted by the assessee during the course of survey conducted on it on 13.11.2014 and 14.11.2014. We have also gone through the reply dated 29.11.2019 given by the assessee with respect to the audit objection. We find it difficult to accept the finding of the PCIT that the AO had not applied his mind to the issue of increase in the stock valuation of Rs. 2.45 crore which had not been reflected while filing the return of income. It is also worth our observation that the AO was conscious of the fact that non-declaration of Rs. 2.45 crore would result in the fall in the gross profit/net profit and the same was enquired into by the AO by requiring the assessee to explain the reason for the fall in gross profit/net profit. Apparently based on the submissions made by the assessee in this regard the AO agreed with the claim of the assessee that the offer of increase in the valuation of stock made on 14.11.2014 got subsumed while preparing the financial result for the year ending 31.03.2015. Although the AO might not have recorded his satisfaction in as many words but looking into the record before us we can safely conclude that the AO had given a thoughtful consideration to the issue and had accepted the assessee s contention only after adequate enquiry and due application of mind. Also gone through the audit objection copy of which was furnished before us and for which there is a reply furnished by the assessee on 29.11.2019 and it has been rightly contended by the Ld. AR that the same has to be considered for the purposes of the record as per clause (b) to Explanation 1 of Section 263. AO made the requisite enquiries therefore it is not a case of no enquiry and if the Ld. Pr. CIT was not satisfied with the enquiries made by the AO he should have conducted the enquiries himself to record the findings that the assessment order was erroneous and he should not have simply set aside the order passed by the AO directing him to conduct the further enquiries. Thus no hesitation in holding that the assumption of jurisdiction u/s 263 of the Act on the ground that there was no enquiry by the AO and on the ground of non-application of mind by the AO is bad in law and cannot be upheld - PCIT was not justified in exercising his power to invoke the provision of Section 263 of the Act on the basis of audit objection raised by the Audit Wing of the Department.- Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Adequacy of enquiries made by the Assessing Officer (AO) during the assessment proceedings. 3. Application of mind by the AO regarding the increase in stock valuation. 4. Validity of proceedings initiated under Section 263 based on an audit objection. 5. Delay in filing the appeal due to COVID-19. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The appeal was filed against the order passed under Section 263 by the Principal Commissioner of Income Tax (PCIT), Ludhiana-1. The PCIT had set aside the assessment order on the grounds that it was erroneous and prejudicial to the interest of revenue. The assessee contended that the PCIT erred in assuming jurisdiction under Section 263, arguing that the original assessment was completed after due application of mind and consideration of all relevant facts. 2. Adequacy of enquiries made by the AO during the assessment proceedings: The assessee argued that the AO had made requisite enquiries during the assessment proceedings, including the verification of stock valuation and unexplained receivables. The AO had issued a questionnaire, and the assessee had duly responded with detailed explanations and supporting documents. The order sheet entries indicated that the AO had examined bills, vouchers, and impounded material from the survey operation conducted on the assessee's premises. 3. Application of mind by the AO regarding the increase in stock valuation: The assessee disclosed an additional business income of Rs. 3.25 crore during the survey, which included Rs. 2.45 crore for increased stock valuation and Rs. 0.80 crore for unexplained receivables. The AO considered these disclosures and the consistent method of stock valuation followed by the assessee. The AO's acceptance of the assessee's explanations and the absence of any adverse findings indicated due application of mind. 4. Validity of proceedings initiated under Section 263 based on an audit objection: The assessee contended that the proceedings under Section 263 were initiated based on an audit objection, which is not a valid ground for invoking Section 263. The Tribunal referred to the judgment of the Hon'ble jurisdictional High Court in CIT vs. Sohana Woollen Mills, which held that mere audit objections cannot justify the exercise of jurisdiction under Section 263. The Tribunal concurred with this view, finding that the PCIT's action was not justified. 5. Delay in filing the appeal due to COVID-19: The appeal was filed with a delay of 83 days, which the assessee attributed to the COVID-19 pandemic. The Tribunal condoned the delay, considering the binding nature of the CBDT Circular No. 10/2021 and the Hon'ble Apex Court's order in suo moto Writ Petition dated 27.05.2021, which provided relaxation for filing appeals due to the pandemic. Conclusion: The Tribunal found that the AO had made adequate enquiries and applied his mind during the assessment proceedings. The proceedings under Section 263 were deemed invalid as they were based on an audit objection and lacked sufficient grounds. The Tribunal quashed the PCIT's order under Section 263 and allowed the assessee's appeal. The delay in filing the appeal was condoned due to the COVID-19 pandemic. Final Judgment: The appeal of the assessee was allowed, and the order under Section 263 was quashed. The Tribunal pronounced the order on 31.03.2022.
|
