2022 (10) TMI 1023 - AT - Income Tax

Revision u/s 263 - As per CIT, AO has not examined all the unsecured loans taken during the year - HELD THAT - AO has discussed only the issue regarding unsecured loan that too giving reference to the balance sheet of unsecured loan as on 31.03.2013 and as on 31.03.2012. Addition was made only on the basis of the admission of the assessee that he was unable to provide the details of other unsecured loan. We note that during the year under appeal i.e. AY 2012-13, the AO was required to examine the unsecured loan taken during the year i.e. FY 2011-12. AO has only given reference to the balances of unsecured loan appearing on 31.03.2013 and comparing the same with the balances of unsecured loan as on 31.03.2012 and has completely overlooked the fact that various unsecured loans were taken during FY 2011-12 which is part of the details filed by the assessee itself. AO has only confirmed the addition of unsecured loan of Rs. 17,00,000/- which the assessee himself admitted to be unable to explain. Therefore, so far as the issue of unsecured loans are concerned, ld. AO has not examined all the unsecured loans taken during the year and the same has been rightly directed by ld. PCIT to be examined in the set aside proceedings. Addition to the capital account - A perusal of the bank account of the assessee placed that Rs. 21,50,000/- was received in lieu of agreement for construction and out of this sum Rs. 15,00,000/- was transferred in March 2012 and Rs. 1,00,000/- was transferred from other sources of the assessee on 04.11.2011. In our view, the assessee has duly explained the source of capital addition in the account of the proprietorship concern which ld. AO has examined properly and the source of addition to capital account stands duly explained and no further examination needs to be carried out by the ld. AO on this issue and, thus, the finding of the ld. PCIT on this issue is reversed. Addition of fixed assets - There is no information provided by the assessee before the ld. AO and nor proper explanation was given before the ld. PCIT also and therefore, this issue has been rightly set aside by ld. PCIT to the ld. AO for doing the needful. Sundry creditors - We find that the assessee provided complete details of the sundry creditors with the ledger accounts and on going through the same, we find that with all the sundry creditors the assessee is carrying out regular business activity, they are running accounts and there is no reason to doubt the genuineness of the sundry creditors appearing in the balance sheet as on 31.03.2012 which includes the sundry creditors Ori-Plast Limited of which detailed vouchers, bills and ledger accounts were filed. We, therefore, are of the considered view that since the ld. AO examined this issue, the same need not be set aside for fresh adjudication and to this extent, the finding of the ld. PCIT on this issue is reversed. Calculation of gross profit - During the survey it was noticed that the assessee was maintaining two sets of books of account. A perusal of the assessment order reveals that AO has made no efforts to examine this issue as to whether the assessee was keeping two sets of books of account for the year under appeal and whether any such evidence was gathered by the survey team pertaining to FY 2011-12. Assessment order is completely silent on this issue and the reconciliation statement filed by the assessee before ld. AO do not contain any specific details and it refers to gross profit as per the impounded books at Rs. 14,04,012/- and the same has been compared to gross profit as per the audited books of account at Rs. 3,50,752/-. There is complete mismatch of figures. Thus, in our view this issue of reconciliation of gross profit has rightly been set aside to the ld. AO for afresh examination and to this extent the finding of the ld. PCIT is confirmed. The action of PCIT invoking jurisdiction u/s 263 of the Act and holding the assessment order as erroneous insofar as prejudicial to the interests of the Revenue is partly sustained in view of the observations made herein above.

Summary

Issues:
Challenge to jurisdiction of Principal Commissioner under section 263 of the Income Tax Act, 1961 and setting aside of assessment order under section 143(3) of the Act.

Analysis:

Issue 1: Challenge to Jurisdiction of Principal Commissioner under Section 263:
The appeal pertains to the Assessment Year 2012-13 and challenges the order under section 263 of the Income Tax Act, 1961. The Principal Commissioner of Income Tax-17, Kolkata, found the assessment order passed under section 147 of the Act to be erroneous and prejudicial to the interests of revenue. The appellant contended that the original assessment was not erroneous as proper investigation was conducted. However, the Tribunal observed that the appellant failed to appear for multiple hearings, leading to the disposal of the appeal with the assistance of the Departmental Representative and available records.

Issue 2: Setting Aside of Assessment Order under Section 143(3) of the Act:
The Principal Commissioner identified various discrepancies in the assessment order, such as differences in gross profit, unverified sources of capitalization, inadequate verification of fixed assets, unsecured loans, and sundry creditors. After issuing a show cause notice, revisionary proceedings were conducted, and it was concluded that certain issues required further examination by the Assessing Officer. The Tribunal noted that the original assessment did not adequately address all the concerns raised by the Principal Commissioner. Specifically, the Tribunal highlighted discrepancies related to unsecured loans, capital account additions, fixed assets, sundry creditors, and calculation of gross profit.

Detailed Findings:
- The Tribunal found that the Assessing Officer did not thoroughly examine all unsecured loans taken during the relevant year, as only one specific unsecured loan was addressed in the assessment.
- Regarding the addition to the capital account, the Tribunal accepted the explanation provided by the assessee for the source of capital addition, reversing the Principal Commissioner's finding on this issue.
- The lack of information provided by the assessee on the addition of fixed assets led the Tribunal to agree with the direction to the Assessing Officer for further examination.
- The Tribunal determined that the details provided by the assessee regarding sundry creditors were comprehensive and genuine, requiring no fresh adjudication.
- The issue of gross profit calculation was highlighted, with discrepancies between impounded and audited books. The Tribunal agreed with the Principal Commissioner's decision to set this issue aside for re-examination by the Assessing Officer.

Conclusion:
The Tribunal partly upheld the Principal Commissioner's decision, sustaining the finding that the assessment order was erroneous and prejudicial to revenue interests. The appeal of the assessee was partly allowed based on the detailed analysis of each issue raised in the appeal.

This comprehensive analysis of the legal judgment highlights the challenges to jurisdiction and the discrepancies in the assessment order, providing a detailed examination of each issue addressed in the appeal before the Tribunal.