2024 (11) TMI 856 - AT - Income Tax

Revision u/s 263 - excess deduction of transport expenses and non deduction of TDS on transportation charges - CIT held that the AO failed to verify these issues adequately, thus rendering the assessment order erroneous and prejudicial to the interests of the Revenue - HELD THAT - Details of Form 26Q and quarterly return in Form 27A were verified by the AO along with quarter wise details of both the transporters from whom TDS was deducted as well as from transporters who were not liable for TDS deduction in view of sub-section (6) of section 194C of the Act, as they were not owning more than ten goods carriage during the relevant financial year. We find that the aforesaid issues were duly explained by the assessee not only before the AO, but also, before the ld. Pr. CIT. However, the Ld. Pr. CIT without examining the explanation given by the assessee and also without pointing out any defect or infirmity in the details furnished by the assessee, simply held that the AO was supposed to make enquiries/verification upon the aforesaid issues and set aside the assessment order. The ld. Counsel has demonstrated that all the factual discrepancies pointed out by the ld. Pr. CIT regarding lack of enquiry by the AO were, in fact, factually wrong. As per the provisions of section 263 of the Act, the ld. Pr. CIT was supposed to go through the said details and should have pointed out as to which of the fact or explanation needs what further enquiries. The words as he deems necessary , in our view, do not mean that the Ld. Pr. CIT is left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263 of the Act, it was incumbent upon the Ld. Pr. CIT to make or cause to make an enquiry. So far as the words as he deems necessary are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue? Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. Pr. CIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the Assessing Officer was erroneous so far as it was prejudicial to the interest of Revenue. Admittedly, the Assessing Officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order. The ld. Counsel for the assessee, has demonstrated before us that both the points, which the Ld. PCIT has held that the Assessing officer was supposed to examine, have been duly examined by the Assessing Officer during the assessment proceedings and the observations of the Ld. PCIT regarding any lack in enquiry on both the points was factually wrong. The ld. Pr. CIT, as discussed above, has not pointed out any error or discrepancy in the details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr. CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the Assessing Officer. Thus, the impugned order of the Ld. PCIT passed u/s 263 of the Act is not sustainable as per law, the same is accordingly, hereby quashed - Assessee appeal allowed.

Summary

Issues Involved:

1. Whether the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interests of the Revenue under Section 263 of the Income-tax Act, 1961.
2. Whether the AO conducted adequate enquiries and verifications during the scrutiny assessment proceedings.
3. The applicability of Explanation 2 to Section 263(1) of the Income-tax Act regarding lack of enquiry by the AO.

Issue-wise Detailed Analysis:

1. Erroneous and Prejudicial Assessment Order:

The primary issue was whether the assessment order for the assessment year 2019-20, passed by the AO, was erroneous and prejudicial to the interests of the Revenue, as claimed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income-tax Act. The Pr. CIT observed discrepancies in transportation expenses claimed by the assessee, specifically pointing out excess deduction of transport expenses and inadequate TDS deductions on transportation charges. The Pr. CIT held that the AO failed to verify these issues adequately, thus rendering the assessment order erroneous and prejudicial to the interests of the Revenue. However, the Tribunal found that the AO had indeed conducted necessary verifications and enquiries, and the assessee had provided satisfactory explanations and documentation for the expenses and TDS deductions. The Tribunal emphasized that the Pr. CIT did not point out any specific errors or discrepancies in the details furnished by the assessee, nor did he examine the evidence provided.

2. Adequacy of Enquiries and Verifications by AO:

The Tribunal examined whether the AO had conducted adequate enquiries and verifications during the scrutiny assessment proceedings. The assessee contended that all necessary details and explanations were provided to the AO, including the summary of transportation charges, details of toll expenses, and TDS deductions. The AO had verified Form 26Q and quarterly returns in Form 27A, along with details of transporters exempt from TDS under sub-section (6) of section 194C. The Tribunal found that the AO had indeed conducted thorough enquiries and verifications, and the Pr. CIT's observations regarding lack of enquiry were factually incorrect. The Tribunal noted that the Pr. CIT failed to demonstrate any specific inadequacies in the AO's enquiries or to provide reasons why further enquiries were necessary.

3. Applicability of Explanation 2 to Section 263(1):

The Pr. CIT invoked Explanation 2 to Section 263(1), suggesting that the AO's order was erroneous due to lack of enquiry. However, the Tribunal highlighted that this provision does not grant unbridled powers to the Pr. CIT to revise every order on the grounds of inadequate enquiry. The Tribunal emphasized that the Pr. CIT must demonstrate that the AO's enquiries were not in accordance with what a reasonable and prudent officer would have conducted. The Tribunal referred to various judicial precedents, asserting that when the AO has made enquiries to his satisfaction and has taken a possible view, the Pr. CIT cannot invoke Section 263 merely because he holds a different opinion. The Tribunal concluded that the Pr. CIT's action was unjustified as he did not provide specific reasons or evidence to support his claim that the AO's order was erroneous and prejudicial to the interests of the Revenue.

Conclusion:

The Tribunal quashed the order passed by the Pr. CIT under Section 263 of the Income-tax Act, holding that the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. The Tribunal emphasized that the AO had conducted adequate enquiries and verifications, and the Pr. CIT failed to demonstrate any specific errors or inadequacies in the AO's assessment. Consequently, the appeal of the assessee was allowed, and the consequential additions, if any, were deleted.