2022 (6) TMI 112 - AT - Income Tax

Revision u/s 263 by CIT - As per CIT AO during the course of assessment proceedings did not examine the genuineness of the transaction and capacity of the loan creditors of new loans added during the year - Also did not even call for confirmations of loan transactions from the purported loan creditors - HELD THAT - Though the return filed by the assessee was selected for Complete Scrutiny under the Category CASS however there is no discussion on examination/verification conducted by the AO on the issues highlighted by the learned PCIT in the assessment order. There is also no mention in the assessment order about the notices being issued and reply being filed on these issues during assessment proceedings. It is pertinent to note that as per Explanation 2 to section 263 of the Act order passed by the AO shall be deemed to be erroneous insofar as it is prejudicial to the interest of revenue if the said order is passed without making inquiries or verification which should have been made by the Assessing Officer. In view of the facts as are available on record we are of the considered view that the present case clearly falls within the ambit of provision of the aforesaid Explanation. Thus the impugned revision order passed under section 263 of the Act is completely justified in the facts of the present case. Accordingly the grounds raised by the assessee are dismissed.

Summary

Issues:
Challenge to order passed under section 263 of the Income Tax Act, 1961 for the assessment year 2016-17.

Analysis:
The appeal was filed challenging the order passed under section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax, Mumbai. The appellant did not appear for the hearing, and the appeal was disposed of ex-parte. The grounds raised by the appellant included contentions regarding the genuineness of unsecured loans and other expenses in the assessment order dated 22/12/2018. The appellant disputed the order passed by the Principal Commissioner under section 263 of the Act, claiming it was merely a change of opinion and bad in law.

The Principal Commissioner issued a notice under section 263, highlighting issues related to the admissibility of business expenses, genuineness of unsecured loans, correctness of stock valuation, and admissibility of other expenses. The Principal Commissioner observed discrepancies in the unsecured loans and other expenses claimed by the appellant, leading to the selection of the case for scrutiny. The appellant failed to provide sufficient details to verify the genuineness and creditworthiness of the loans and the claimed expenses.

The Principal Commissioner found the Assessing Officer's order to be erroneous and prejudicial to the revenue as the genuineness of new loans and other expenses were not adequately examined. The Principal Commissioner set aside the assessment order and directed the Assessing Officer to verify the genuineness of the loans and expenses. The appellant's appeal was dismissed as they did not object to the revision proceedings nor provide submissions during the assessment proceedings. The Tribunal upheld the Principal Commissioner's order under section 263, citing the failure of the Assessing Officer to conduct necessary inquiries and verifications.

In conclusion, the Tribunal dismissed the appellant's appeal, affirming the Principal Commissioner's order under section 263 as justified. The decision was based on the failure of the Assessing Officer to conduct essential inquiries, rendering the original assessment order erroneous and prejudicial to the revenue. The Tribunal found the revision order to be valid under the circumstances of the case.