2024 (7) TMI 1479 - AT - Income Tax

Revision u/s 263 - as per CIT AO has not made efforts to examine any details and in this case simply the details furnished by the assessee only examined and passed the assessment order, thus order passed by AO is erroneous and prejudicial to the interest of Revenue - Addition of loans and advances, sale of shares and profit on sale of share of SMS Infrastructure Ltd. and receipt of interest and interest payment - HELD THAT - The assessee has borrowed huge loans and also made advances. The assessee also made various sales and he received profit on sale of share of SMS Infrastructure Ltd. He received interest also. The Assessing Officer has not examined any of the issues and not called for any details from the assessee. The assessee filed some details about borrowed funds which were given to certain parties out of which the assessee himself has disallowed @ 12%, and for the remaining parties, the Assessing Officer has added. The assessee himself has claimed huge interest and also filed loss return of income. It was the duty of the Assessing Officer to call for the details such as what is the reason for borrowing such huge amount; what is the amount of money utilised for the purpose of business; why he has given loans to various parties; what is the receipt of interest; the quantum of shares have been sold by the assessee and what is the ratio of profit he received whether long term capital gain / short term capital gain. All such details have were required to be examined by the Assessing Officer and he has examined nothing. For the reasons stated above, we are of the opinion that it is a fit case for invoking the provisions of section 263 of the Act. We find that the order passed by the Assessing Officer is erroneous inasmuch as it is prejudicial to the interests of Revenue

Summary

Issues:
Appeal challenging order under section 263 of the Income Tax Act, 1961 for assessment year 2017-18.

Analysis:
The assessee filed a return declaring a loss and debited interest in the Profit & Loss A/c. The Assessing Officer questioned the interest debited and the loans given, seeking justification. The Assessing Officer noted interest-free loans given and proposed disallowance. The assessee agreed to disallow a portion of the interest. Subsequently, the Principal Commissioner of Income Tax issued a show cause notice under section 263, questioning the assessment order. The Departmental Representative argued that the assessment was erroneous and prejudicial to revenue due to lack of examination by the Assessing Officer.

The Appellate Tribunal found that the Assessing Officer did not adequately examine crucial aspects like borrowed funds utilization, loans given, profit on share sales, and interest received. The Tribunal noted that the Assessing Officer failed to verify details provided by the assessee, leading to an incomplete assessment. Citing legal precedents, the Tribunal held that inadequate inquiry by the Assessing Officer justifies invoking section 263. The Tribunal agreed with the Principal Commissioner's decision to set aside the assessment order and directed a fresh assessment with proper inquiries.

The Principal Commissioner's order highlighted the Assessing Officer's failure to examine key issues like loans, share sales, and interest receipts. The order emphasized the lack of verification of details provided by the assessee, making the assessment erroneous and prejudicial to revenue. Citing court decisions, the Principal Commissioner justified the revision under section 263. The order set aside the original assessment and directed a fresh assessment with a thorough examination of all relevant issues.

In conclusion, the Appellate Tribunal upheld the Principal Commissioner's order under section 263, dismissing all grounds raised by the assessee. The appeal challenging the assessment for the year 2017-18 was consequently dismissed, affirming the need for a fresh assessment to address the inadequacies in the initial examination by the Assessing Officer.