2022 (10) TMI 1035 - AT - Income Tax

Revision u/s 263 by CIT - there is a huge difference in invoice value and the duty paid as per the Annexure-15 and the ITS data available - CIT came to the conclusion that the purchase value/invoice values have wrongly mentioned to reduce the net profit of the Firm and the same has not been verified by the AO at the time of finalizing the assessment under Section 143(3) - HELD THAT - Now, assessee has submitted a Chart before the Ld. Pr. CIT giving a reconciliation of the difference pointed out by Ld. Pr. CIT and submitted that all difference has been duly explained. However, the issue for consideration is whether this aspect should have been enquired during the course of assessment proceedings. In our view, this glaring difference should have been enquired during the course of assessment proceedings, which the Ld. Assessing Officer omitted to do. In the case of L.A. Developers 2022 (6) TMI 1321 - ITAT CUTTACK ITAT held that failure on part of Assessing Officer to examine or make addition in respect of difference between cash flow and balance sheet had clearly made assessment order erroneous and consequently prejudicial to interest of revenue. Therefore, Commissioner was right in invoking his powers u/s. 263 of the Act. In view of the above facts and the judicial precedents on the subject, in our considered view, reconciliation should have been sought by Ld. Assessing Officer during the course of assessment proceedings. Non-seeking of such reconciliation, which apparently should have been sought, in our view, indicates non-application of mind to the given set of facts by Ld. Assessing Officer during the course of assessment proceedings. Accordingly, we find no infirmity in the order of Ld. Pr. Ld. CIT(A), who, in our view, in the instant set of facts has correctly concluded that the order passed by Ld. Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Appeal of assessee dismissed.

Summary

Issues:
Assessment order under Section 143(3) challenged for being erroneous and prejudicial to revenue's interest due to discrepancies in invoice values and duty payments.

Analysis:
The appeal was filed against the order passed by the Ld. Pr. CIT-1, Rajkot for Assessment Year 2017-18. The assessee challenged the order on various grounds, primarily asserting that the assessment order was erroneous and prejudicial to the revenue's interest. The Ld. Pr. CIT found discrepancies in the invoice values and duty payments submitted by the assessee during the assessment proceedings. The assessee had shown less invoice value and duty paid compared to the data available with the Department. Consequently, the Ld. Pr. CIT concluded that the purchase values were wrongly mentioned to reduce the firm's net profit, which was not verified by the Assessing Officer (AO) during finalizing the assessment under Section 143(3) of the Income Tax Act. The Ld. Pr. CIT set aside the assessment order as erroneous and prejudicial to the revenue's interest, leading to the appeal before the ITAT.

During the proceedings, the assessee contended that the issues raised had been thoroughly verified by the AO, who had called for details of purchases and expenses. The assessee provided detailed responses, including reconciliation of assessable value and duty payments. However, the Ld. Pr. CIT found the assessee's submissions unacceptable, noting that the reconciliation was provided for the first time during the proceedings. The absence of such details in the assessment records and the failure of the AO to conduct inquiries or verifications led the Ld. Pr. CIT to deem the assessment order erroneous and prejudicial to the revenue's interest. The ITAT concurred with this assessment, emphasizing the importance of seeking reconciliation for glaring differences during assessment proceedings, as highlighted in relevant judicial precedents.

The ITAT observed a substantial difference between the invoice values and duty payments as per the assessee's submissions and the data available with the Department. Despite the assessee's subsequent reconciliation, the failure of the AO to enquire about these discrepancies during the assessment proceedings was deemed a lack of application of mind. Citing a relevant judicial precedent, the ITAT upheld the Ld. Pr. CIT's decision that the assessment order was indeed erroneous and prejudicial to the revenue's interest. Consequently, the ITAT dismissed the appeal, affirming the order of the Ld. Pr. CIT.

In conclusion, the ITAT upheld the decision that the assessment order under Section 143(3) was erroneous and prejudicial to the revenue's interest due to discrepancies in invoice values and duty payments. The failure of the AO to seek reconciliation for these discrepancies during the assessment proceedings was deemed a lack of application of mind, leading to the dismissal of the appeal.