2016 (9) TMI 1153 - AT - Income Tax

Revision u/s 263 - difference of TDS as per 26AS and TDS as declared in Return of Income (ROI) - reasons to believe - Held that - AO is also duty bound to examine that apart from the AIR information, if there is potential escapement income more than ₹ 10 lacs. On the facts and circumstances of the present case, we are of the view that the AO ought to have made proper and adequate enquiries with regard to all the aspects set out in the show cause notice u/s.263 of the Act. The Hon ble Calcutta High Court in the case of Maithan International (2015 (4) TMI 479 - CALCUTTA HIGH COURT ) has however taken a view that jurisdiction u/s 263 of the Act could be invoked when the AO fails to make an enquiry which he ought to have made in the given facts and circumstances of a case. We are therefore unable to accept the plea of the ld. Counsel for the Assessee in this regard. As we have already mentioned, at this stage that we need not go into the merits of the issues raised by the CIT in the show cause notice u/s 263 of the Act because in the impugned order the AO has only been directed to examine the issues on merits after affording the assessee opportunity of being heard. In the given circumstances we are of the view that the assessee is at liberty to put forth of its claims on the merits of the issues before the AO in the assessment proceedings to be completed pursuant to the impugned order of CIT. For the reasons given above we uphold the order of CIT u/s 263 of the Act and dismiss the appeal of the assessee. - Decided against assessee

Summary

Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act, 1961.
2. Adequacy of enquiries conducted by the Assessing Officer (AO) during the assessment.
3. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Validity of the order passed under section 263 of the Income Tax Act, 1961:

The Commissioner of Income Tax (CIT) exercised powers under section 263 of the Income Tax Act, 1961, to revise the assessment order dated 28.03.2014 for AY 2010-11, deeming it erroneous and prejudicial to the interest of the revenue. The CIT identified several discrepancies, including a significant increase in share application money, unexplained fall in net profit ratio, and unverified anomalies in expenses. The CIT concluded that the AO failed to conduct proper enquiries and did not apply his mind to the issues before concluding the assessment. Consequently, the CIT cancelled the assessment order and directed the AO to pass a denovo assessment order after making proper enquiries, including those mentioned in the notice under section 263.

2. Adequacy of enquiries conducted by the Assessing Officer (AO) during the assessment:

The Tribunal examined whether the AO made necessary and proper enquiries before concluding the assessment. The case was selected for scrutiny based on AIR information regarding differences in TDS as per Form 26AS and the return of income. The AO conducted multiple hearings, called for books of accounts, and verified purchases and sundry creditors by issuing notices under section 133(6). However, the Tribunal noted that the AO's enquiries were inadequate, particularly concerning the receipt of share capital and other discrepancies highlighted by the CIT. The Tribunal referenced the CBDT instructions limiting the scope of scrutiny to AIR information unless there was potential escapement of income exceeding ?10 lakhs. The Tribunal concluded that the AO failed to make proper and adequate enquiries, justifying the CIT's invocation of jurisdiction under section 263.

3. Condonation of delay in filing the appeal:

The appeal was filed with a delay of 27 days. The assessee attributed the delay to the absence of its director, who was out of station for urgent business purposes. The Tribunal, considering the principles of substantive justice and the need to determine tax liability in accordance with the law, condoned the delay despite the reasons being vague. The Tribunal emphasized that the assessee should not be denied the right to adjudication of the appeal due to technical and procedural lapses.

Conclusion:

The Tribunal upheld the CIT's order under section 263, dismissing the appeal by the assessee. The Tribunal emphasized that the AO failed to make necessary and proper enquiries, justifying the CIT's revision of the assessment order. The Tribunal also condoned the delay in filing the appeal, ensuring that substantive justice was rendered. The assessee was granted the liberty to present its claims on the merits of the issues during the reassessment proceedings.