2015 (3) TMI 142 - AT - Income Tax

Revision u/s 263 - AO has accepted the income from house property to be Nil without any application of mind or making any enquiry, therefore, his order is also erroneous and prejudicial to the interest of the Revenue - CIT observed that three properties owned by assessee should have been computed as per provisions of section 22 read with section 23 of the Act - Held that - issue of income from house property is concerned, we find that the Assessing Officer has made a general enquiry with regard to the details of moveable and immoveable properties and investment made therein, but we do not find any proper reply with regard to the immoveable properties and A.L.V. worked out thereon. Therefore, it cannot be said that the Assessing Officer has made an enquiry on this issue. Since the Assessing Officer has accepted the claim of the assessee on this issue without making any enquiry, we are of the view that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and we accordingly confirm the order of the ld. Commissioner of Incometax in this regard. - Decided in favour of revenue. Debit entry of ₹ 27,75,722/- in the trading account for the year ending on 31.3.2008 under the head provisions to be made for expenses in current year and credit card payments - Held that - Assessing Officer has made a proper enquiry with regard to the debit entry of ₹ 27,75,722/- in trading account for the year ending on 31.3.2008 under the head provisions to be made for expenses in current year and credit card payments. Therefore, on these two issues, the assessment order cannot called to be erroneous and prejudicial to the interest of the Revenue. We accordingly set aside the order of the ld. Commissioner of Income-tax on these two issues. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the assessment made by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the Revenue.
2. Whether the AO made proper and detailed inquiries before allowing certain claims made by the assessee.
3. Whether the provisions of section 263 of the Income-tax Act, 1961 were applicable.
4. Whether the order passed by the Commissioner of Income-tax (CIT) was legal and based on facts.

Detailed Analysis:

1. Erroneous and Prejudicial Assessment:
The CIT held that the assessment made by the AO was erroneous and prejudicial to the interest of the Revenue. The CIT observed that the AO allowed a claim of Rs. 27,75,722 under the head "provisions to be made for expenses in the current year" without examining the details. The CIT also noted that the AO accepted the income from house property to be Nil without any application of mind or making any inquiry. Additionally, the AO allowed credit card payments of Rs. 29,59,657 as business expenses without calling for details of expenses and examining the liability.

2. Proper and Detailed Inquiries:
The assessee contended that the AO made proper and detailed inquiries during the assessment proceedings. For the Rs. 27,75,722 provision, the assessee provided a detailed explanation and the AO accepted the claim after being convinced. Regarding the immovable properties, the AO raised queries, and the assessee explained the use of properties, which the AO accepted. For credit card payments, the assessee furnished details, and the AO allowed the claim as business expenditure.

3. Applicability of Section 263:
The Tribunal examined whether the AO's order could be revised under section 263. It was noted that the AO had raised queries and received explanations from the assessee on the issues of provisions for expenses and credit card payments. The Tribunal cited various judicial pronouncements, emphasizing that an order cannot be set aside merely for inadequate inquiry if some inquiry was conducted. It was held that the AO's acceptance of the assessee's claims after inquiries does not make the order erroneous and prejudicial to the Revenue.

4. Legality of CIT's Order:
The Tribunal found that the AO made proper inquiries regarding the provisions for expenses and credit card payments, thus the CIT's order on these issues was set aside. However, for the income from house property, the Tribunal noted that the AO did not make any proper inquiry. Therefore, the CIT's order was confirmed regarding the income from house property.

Conclusion:
The Tribunal concluded that the AO made proper inquiries on the issues of provisions for expenses and credit card payments, thus these parts of the CIT's order were set aside. However, the AO failed to make proper inquiries regarding the income from house property, and hence, the CIT's order on this issue was confirmed. The appeal of the assessee was partly allowed.