2014 (4) TMI 439 - AT - Income Tax

Validity of Revision by the CIT u/s 263 of the Act - Jurisdiction Held that - The order of the AO was not at all a speaking order - On a specific enquiry from the Bench with regard to any questionnaire or explanation asked by the Assessing Officer in respect of the sale returns which was found to be abnormal feature in respect of a business of contractor - It will be proper to admit the additional evidences it would be appropriate to remit back the matter to the AO for fresh adjudication - the CIT has estimated gross profit @ 20% which cannot be found in order The CIT was justified in invoking the provisions of section 263 of the Income-tax Act, 1961 as the Assessing Officer s order was completely nonspeaking and there was no evidence that enquiries have been made on certain issues which were prima facie abnormal in the assessee s case - the action taken by the CIT u/s 263 of the Act upheld - the additional evidences filed by the assessee be admitted and the issue is remitted back to the AO for verification of facts Decided in partly favour of Assessee.

Issues Involved:
1. Validity of order passed by Assessing Officer under section 143(3)
2. Jurisdiction of CIT to invoke section 263 of the Income Tax Act, 1961
3. Addition of trading amount and rejection of books of accounts under section 145(3)
4. Jurisdiction of CIT to make additions without proper enquiry
5. Treatment of advance amount in declared receipts

Issue 1: Validity of order passed by Assessing Officer under section 143(3)
The appeal stemmed from the order of the CIT, Meerut for the assessment year 2008-09. The Assessing Officer had computed the income/loss of the assessee, a civil contractor, and determined a net loss to be carried forward. However, the CIT (A) initiated proceedings under section 263, contending that the assessment was done without proper enquiry.

Issue 2: Jurisdiction of CIT to invoke section 263 of the Income Tax Act, 1961
The appellant challenged the CIT's order under section 263, arguing that it was arbitrary, unjust, and illegal. The grounds of appeal included assertions that the assessment order by the Assessing Officer was not erroneous, the CIT had no jurisdiction to invoke section 263, and that the CIT's observations and directions were factually incorrect or untenable in law. The appellant also contested the trading addition made by the CIT and the rejection of books of accounts under section 145(3).

Issue 3: Addition of trading amount and rejection of books of accounts under section 145(3)
The CIT had made a trading addition after rejecting the books of accounts under section 145(3), stating that the results could not be verified. The appellant argued that the CIT's actions were based on estimations and assumptions without proper opportunity for the appellant to be heard, leading to gross injustice.

Issue 4: Jurisdiction of CIT to make additions without proper enquiry
The appellant contended that the CIT had no jurisdiction to make additions based on estimations and assumptions without proper enquiry or providing a reasonable opportunity to be heard. The appellant disputed the CIT's finding regarding the treatment of an advance amount in declared receipts.

Issue 5: Treatment of advance amount in declared receipts
The Tribunal found that the Assessing Officer's order was not a speaking order and lacked proper enquiry into certain abnormal features in the assessee's case. The Tribunal admitted additional evidences filed by the assessee and remanded the issue to the Assessing Officer for fresh adjudication. The Tribunal upheld the CIT's invocation of section 263 due to the non-speaking nature of the Assessing Officer's order and directed the Assessing Officer to estimate the gross profit afresh.

In conclusion, the Tribunal allowed the appeal for statistical purposes, sustaining the CIT's action under section 263 and ordering further investigation by the Assessing Officer on various issues raised during the proceedings.

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