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2022 (5) TMI 945 - AT - Income TaxRevision u/s 263 - AO had not carried out requisite inquiry regarding advances from customers and also introduction of fresh capital - Assessee had simply submitted a verbal narration without furnishing any documentary evidence in support of its claim as further observed that assessee did not submit copy of bank statement reflecting the repayment of liabilities due to M/s Maa Kaila Foundries Private Limited in support of the confirmation of accounts - HELD THAT - As per clause (a), if the order is passed without making inquiries or verification which should have been made, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue, if so opined by the Pr.CIT. In the present case, in the opinion of Pr.CIT, the assessment order was passed without making requisite inquiries/ verification which should have been made. As per Pr.CIT, AO failed to make necessary inquiry. It is also recorded that the assessee has simply submitted verbal narration without furnishing any documentary evidence. Hence, it was held that the assessment order dated 31.05.2017 passed u/s 143(3) was erroneous and also prejudicial to the interest of revenue - we find that the AO issued a questionnaire along with notice u/s 142(1) dated 19.12.2016. In response thereto, the assessee had filed his reply regarding the queries raised by the AO. It is also transpired from record that notices u/s 133(6) of the Act were issued. Thereafter, he framed the assessment. We find that the assessee in response to notice u/s 263, had duly explained the transaction related to M/s Maa Kalika Foundaries Pvt. Ltd., introduction fresh capital and also description CAS CHQ XFER WD . Looking to the material placed before us, the Pr.CIT has not made out a case of any prejudice caused to the Revenue. The law is well settled that for exercising power u/s 263 twin conditions are required to be satisfied (i) that the order should be erroneous and; and (ii) it should cause prejudice to the interests of Revenue. It is not the case where the assessee failed to substantiate his claim, rather the explanation along with supporting evidences were placed before the assessing officer and the learned Pr.CIT. In our considered view merely on the basis of suspicion, invoking of powers u/s 263 would not be justified. The concluded assessment should be revised where there is blatant error committed by the assessing officer, which culminated into the prejudice to the interest of Revenue. But where the Assessing Officer made necessary inquiry and satisfied itself about the explanation offered to him, revising such an order is highly unjustified and contrary in the case of M/s Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT . Therefore, in the present case the action of the learned Pr.CIT is unjustified and the same is hereby set aside and the assessment is restored.- Decided in favour of assessee.
Issues Involved:
1. Legality and jurisdiction of the notice issued under Section 263 of the Income Tax Act, 1961. 2. Whether the assessment order passed under Section 143(3) was erroneous and prejudicial to the interest of Revenue. 3. Adequacy of the Assessing Officer's inquiry regarding advances from customers and introduction of fresh capital. 4. Whether the proceedings under Section 263 were initiated without proper application of mind. 5. Opportunity provided to the appellant to present material evidence. 6. Consideration of facts and circumstances by the Pr. CIT while passing the order under Section 263. Issue-wise Detailed Analysis: Issue 1: Legality and Jurisdiction of Notice under Section 263 The appellant contended that the notice issued under Section 263 and the subsequent order by the Pr. CIT were "illegal, bad in law, and without jurisdiction." The appellant argued that the assessment order under Section 143(3) was neither erroneous nor prejudicial to the interest of Revenue. The Tribunal found that the Pr. CIT had assumed jurisdiction without demonstrating how the assessment order was erroneous and prejudicial to the interest of Revenue, thus making the notice and order under Section 263 legally unsustainable. Issue 2: Erroneous and Prejudicial Assessment Order The Pr. CIT observed that the Assessing Officer did not carry out a requisite inquiry regarding advances from customers and the introduction of fresh capital. The Tribunal noted that the Assessing Officer had indeed raised queries and received responses, including confirmations and bank statements, which were verified. The Tribunal concluded that the assessment order was not erroneous and prejudicial to the interest of Revenue, as the necessary inquiries were made, and the Assessing Officer had taken a possible view based on the evidence provided. Issue 3: Adequacy of Inquiry by Assessing Officer The Pr. CIT alleged that the Assessing Officer failed to verify the identity, genuineness, and creditworthiness of the parties regarding advances from customers and the introduction of fresh capital. The appellant demonstrated that detailed responses, including confirmations, PAN numbers, and bank statements, were provided to the Assessing Officer, who conducted inquiries, including issuing notices under Section 133(6). The Tribunal found that the Assessing Officer made adequate inquiries and that the view taken was a possible one, thereby invalidating the Pr. CIT's claim of inadequate inquiry. Issue 4: Proceedings Initiated without Proper Application of Mind The appellant argued that the proceedings under Section 263 were initiated at the instance of the Assessing Officer and were without proper application of mind, referring to irrelevant issues. The Tribunal observed that the Pr. CIT's decision was based on a different view rather than identifying any blatant error or lack of inquiry by the Assessing Officer. The Tribunal held that revising the assessment order on mere suspicion was unjustified and contrary to established legal principles. Issue 5: Opportunity to Present Material Evidence The appellant claimed that the Pr. CIT did not provide proper and adequate opportunity to present material evidence, thus violating the principles of natural justice. The Tribunal noted that the appellant had submitted detailed explanations and documentary evidence during the assessment proceedings and in response to the notice under Section 263. The Tribunal found that the Pr. CIT's decision was based on the appellant's failure to provide additional evidence, which was unnecessary given the comprehensive evidence already submitted. Issue 6: Consideration of Facts and Circumstances The appellant contended that the Pr. CIT did not properly consider the facts and circumstances of the case and the material on record. The Tribunal reviewed the detailed submissions and evidence provided by the appellant, including confirmations, bank statements, and responses to queries. The Tribunal concluded that the Pr. CIT's order was arbitrary and not based on a thorough consideration of the facts and evidence, thereby setting aside the order under Section 263. Conclusion: The Tribunal allowed the appellant's appeal, setting aside the Pr. CIT's order under Section 263 and restoring the original assessment order passed under Section 143(3). The Tribunal emphasized that the Assessing Officer had made adequate inquiries and taken a possible view based on the evidence provided, and the Pr. CIT's order was unjustified and contrary to legal principles.
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