2022 (5) TMI 1414 - HC - Income Tax

Validity of Revision u/s 263 - Whether inquiry or verification was not made by the Assessing Officer before passing the order? - HELD THAT - The contention of Ld. Senior Standing Counsel that the order passed by the Assessing Officer will fall within the ambit of Explanation 2 (a) appended to Section 263 of the Act, cannot be accepted till it is pointed out as to which inquiry or verification was not made by the Assessing Officer before passing the order. Ld. Senior Standing Counsel is not in a position to deny the fact that prior to passing of order under Section 143(3) of the Act, a questionnaire was issued by the Assessing Officer in the course of assessment proceedings to the assessee. The specific issues addressed by the appellant in the present proceedings were part of the questionnaire. Appellant is not in a position to point out as to what are those inquiries or verification which should have been made but have not been made by the Assessing Officer in the present case so as to make the present case fall within Explanation 2 attached to Section 263 - The substantial questions of law sought to be raised of the grounds of appeal are pure questions of fact which have been adequately answered by the Tribunal.

Summary

Issues:
Appeals filed under Section 260(A) of the Income Tax Act, 1961 by the Revenue against the Tribunal's decision on disallowed expenses during assessment proceedings for the Assessment Year 2013-14.

Analysis:
The Tribunal decided the issue based on arguments in a related case and found that the Assessment Order disallowing certain expenses was erroneous and prejudicial to the Revenue's interest. The Commissioner of Income Tax set aside the Assessment Order under Section 263 of the Act, leading to an appeal by the Assessee. The Tribunal allowed the Assessee's appeal, prompting the Revenue to file an appeal against this decision. The Revenue argued that the assessment was made without proper inquiries and verifications, falling under Explanation 2(a) of Section 263. However, the Court noted that the Assessing Officer did issue a questionnaire to the Assessee before passing the order under Section 143(3) of the Act, addressing specific issues raised in the present proceedings.

The Court emphasized that for Section 263 to apply, two conditions must be met: the order must be erroneous and prejudicial to the Revenue's interest. The Senior Standing Counsel's argument that the order falls under Explanation 2(a) was rejected as they failed to identify which inquiries or verifications were lacking. Referring to the 'M/s Malabar Industrial Co. Ltd. vs. Commissioner of Income-tax, Kerala' case, the Court highlighted that not every loss of revenue constitutes an order prejudicial to revenue unless the Income-tax Officer's decision is unsustainable in law. The Court found the questions raised in the appeal to be factual and adequately addressed by the Tribunal, leading to the dismissal of the appeals.

In conclusion, the Court dismissed the appeals as they found no merit, thereby also disposing of any pending miscellaneous applications related to the case.