1991 (9) TMI 126 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Filing of the return in Delhi instead of Calcutta.
3. Lack of enquiry about the genuineness of the company, its promoters, shareholders, and business activities.
4. Non-disclosure of interest on loans advanced by the company.
5. Absence of essential business expenses in the company's accounts.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The Commissioner observed that the Assessing Officer (AO) who completed the assessment had no jurisdiction over the case, as the company's registered office was in Calcutta, but the return was filed in Delhi. The AO failed to investigate why the return was filed in Delhi and not in Calcutta, which was a significant oversight. The appellant argued that the filing of the return in Delhi was based on future needs and that jurisdictional objections could not be raised post-assessment. However, the Tribunal upheld the Commissioner's view that the AO's lack of jurisdiction rendered the assessment erroneous and prejudicial to the interests of revenue.

2. Filing of the Return in Delhi:
The Commissioner noted that the return was filed in Delhi while the registered office was in Calcutta, raising questions about the AO's jurisdiction. The appellant contended that there was no requirement to seek permission for changing the filing location and that the return was filed in Delhi for future convenience. The Tribunal found that the AO did not make necessary enquiries regarding the change of address, which was a critical lapse, supporting the Commissioner's decision to set aside the assessment.

3. Lack of Enquiry About the Genuineness of the Company:
The Commissioner highlighted that the AO did not conduct adequate enquiries into the genuineness of the company, its promoters, shareholders, and business activities, especially since it was the first year of operation. The appellant argued that all necessary details were provided, and further enquiries were beyond the AO's scope. However, the Tribunal agreed with the Commissioner that the AO should have conducted a deeper scrutiny, given the circumstances, and the lack of such enquiry rendered the assessment erroneous.

4. Non-Disclosure of Interest on Loans:
The company had advanced loans amounting to nearly Rs. 22 lakhs but did not show any interest received or receivable. The appellant explained that interest was accounted for on a cash basis, and no interest was received or accrued during the year. The Tribunal noted that the AO did not make sufficient enquiries regarding this aspect, which was a significant oversight, justifying the Commissioner's invocation of Section 263.

5. Absence of Essential Business Expenses:
The Commissioner pointed out that the company did not claim expenses for establishment charges, office maintenance, rent, or telephone, which would typically be expected in the Profit and Loss account. The appellant did not provide a satisfactory explanation for this absence. The Tribunal found that the AO should have investigated this anomaly, and the failure to do so indicated that the assessment was made in undue haste and without proper enquiry.

Conclusion:
The Tribunal upheld the Commissioner's order under Section 263, finding that the AO's assessment was erroneous and prejudicial to the interests of revenue due to lack of jurisdiction, inadequate enquiry, and undue haste. The appeal of the assessee was dismissed, and the AO was directed to remake the assessment after conducting a thorough enquiry.