2015 (12) TMI 1228 - AT - Income Tax

Revision u/s 263 - unverified purchases - Held that - A.O., while completing the assessment under section 143(3), has not verified the details of purchases adopted by the assessee and to that extent, the Ld. CIT s order under section 263 holding assessment order to be erroneous and prejudicial to the interests of the Revenue also has been upheld by the ITAT. Further, in the final paragraph of its order, this Tribunal has held that the Ld. CIT was right in directing the A.O. to re-do the assessment as the A.O. in the original assessment had not made any enquiries as to the genuineness of the purchase figure or to the validity of the assessee s separate debit of transport expenditure under the Head Direct Expenses i.e., Schedule-11 to the P & L account and further that the A.O. has not applied his mind by verifying from the Sales Tax authorities and failed to ascertain correct figures and hence, the order of the assessment passed by the A.O. without making necessary enquiries on such important points connected with assessment would be erroneous and prejudicial to the interests of the Revenue. From these observations of the Tribunal, it is evident that this Tribunal has held assessment order to be erroneous and prejudicial to the interests of the Revenue and has upheld the order of the Ld. CIT under section 263 in directing the A.O. to re-do the assessment. Though, there is a finding by the Ld. CIT in his order that the A.O. has not made proper enquiries on the issue of inflated purchases, in the penultimate para 4, he has directed the A.O. to re-do the assessment in accordance with his directions which is clearly in contradiction to his earlier finding. The Tribunal has not given any finding on this part of the order of the Ld. CIT. This, in our opinion, is a mistake apparent from record. In view of the same, we modify the order of this Tribunal by adding the following sentences to the end of paragraph-19. However, the direction of the Ld. CIT in paras 4 and 5 are set aside and the A.O. is directed to re-do the assessment after verification of the details relating to the issue and after affording reasonable opportunity of hearing to the assessee.

Summary

Issues involved:
Assessment under section 143(3) of the I.T. Act, revision under section 263, verification of purchases, direction to re-do assessment, failure to verify details, mistakes apparent from record.

Detailed Analysis:

1. Assessment under Section 143(3):
The assessment was completed by the Assessing Officer (A.O.) under section 143(3) of the Income Tax Act, assessing the total income of Rs. 6,41,511. However, the Commissioner of Income Tax (CIT) found the assessment order erroneous and prejudicial to the Revenue's interests due to the A.O.'s failure to verify purchases from Reliance Industries Ltd., including transport charges.

2. Revision under Section 263:
The CIT revised the assessment order under section 263, directing the A.O. to bring to tax the inflated purchases, consider transport charges, CENVAT credits, and VAT input tax. The assessee appealed to the Income Tax Appellate Tribunal (ITAT) against the CIT's order, which was dismissed. The A.O. then passed orders without further verification, leading to subsequent appeals.

3. Direction to Re-do Assessment:
The ITAT upheld the CIT's direction to re-do the assessment, noting the A.O.'s failure to verify purchase details and transport expenditure. However, the CIT's order had contradictory findings, directing the A.O. to re-do the assessment without verifying details, leading to a mistake apparent from the record.

4. Verification of Details:
The assessee argued that the A.O. did not verify the details before making additions, causing injustice. The ITAT acknowledged the need for verification before re-doing the assessment and modified its order to direct the A.O. to verify details and provide a hearing to the assessee.

5. Mistakes Apparent from Record:
The ITAT found a mistake apparent from the record in the CIT's contradictory directions and modified its order to ensure proper verification of details before re-doing the assessment. The ITAT allowed one miscellaneous application and rejected another, ensuring justice for the assessee.

In conclusion, the ITAT's judgment addressed issues related to the proper verification of purchase details, the CIT's contradictory directions, and the need for a fair assessment process to uphold the Revenue's interests.