2017 (9) TMI 960 - AT - Income Tax

Revision u/s 263 - allowable expenditure in connection with the business of the assessee - Held that - It is not disputed that the entire sum of ₹ 70,52,892/- had been duly paid by the assessee to M/s. Sayan Shipping and Cleaning Agency Pvt. Ltd.. In the reply to the show cause notice by CIT u/s 263 of the Act all the above facts are brought to the notice of CIT and CIT had not disputed the facts as stated by the assessee in such reply. The CIT however cross checked the ledger account statement submitted by M/s. Sayan Shipping and Cleaning Agency Pvt. Ltd. received in response to the notice issued by the AO u/s 133(6) of the Act while concluding the original assessment proceedings with the bill nos as produced by the assessee and found discrepancies in its bills. The order of CIT does not spell out as to what was the discrepancy. It is also not disputed that the CIT had not confronted the assessee with the nature of discrepancy. In the present case as rightly contended by the assessee in the light of the admitted factual position the entire sum of ₹ 70,52,892/- had been duly paid by the assessee to M/s. Sayan Shipping and Cleaning Agency Pvt. Ltd.. There cannot be any loss to the revenue in as much as the entire sum had been paid and was admittedly an allowable expenditure in connection with the business of the assessee. It cannot also be said that order of the AO was erroneous as the nature of error in the order of the AO has not been brought out in the order of the CIT. The CIT in the impugned order has not spelt out as what are the discrepancies between the ledger account statement of M/s. Sayan Shipping and Cleaning Agency Pvt. Ltd. and the bill numbers as furnished by the assessee. Without bringing material on record to show that the order of the AO was erroneous the CIT cannot invoke jurisdiction u/s.263 of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed u/s 263 of the Income-tax Act, 1961.
2. Examination of discrepancies in the bills and ledger accounts.
3. Justification for setting aside the assessment order for further verification.

Detailed Analysis:

1. Validity of the order passed u/s 263 of the Income-tax Act, 1961:
The primary issue in this case is whether the Commissioner of Income Tax (CIT) was justified in invoking Section 263 of the Income-tax Act, 1961, to revise the assessment order passed by the Assessing Officer (AO). The CIT issued a show-cause notice u/s 263, alleging that the assessee claimed excess deduction under the head "Clearing and Forwarding charges," which required further verification. The CIT concluded that the AO's order was erroneous and prejudicial to the interests of the revenue, as the AO did not conduct a thorough examination of the expenses claimed by the assessee.

2. Examination of discrepancies in the bills and ledger accounts:
The CIT's order highlighted discrepancies between the bills submitted by the assessee and the ledger account statement obtained from M/s. Sayan Shipping & Cleaning Agency P. Ltd. However, the CIT did not specify the exact nature of these discrepancies or confront the assessee with the details. The assessee argued that the entire amount of ?70,52,892/- was paid to M/s. Sayan Shipping & Cleaning Agency P. Ltd. through banking channels and was duly reflected in the bank statements. The assessee provided detailed explanations and supporting documents, including 26 bills, ledger accounts, and bank statements, to substantiate the claim.

3. Justification for setting aside the assessment order for further verification:
The Tribunal examined whether the CIT's direction to set aside the assessment order for further verification was justified. The Tribunal noted that the assessee had already furnished all necessary documents and explanations during the assessment proceedings. The AO had considered these documents and did not draw any adverse inference. The Tribunal emphasized that the CIT's order did not clearly specify the nature of the discrepancies or errors in the AO's assessment order. The Tribunal concluded that the CIT's direction for further verification amounted to a fishing or roving enquiry, which is not permissible under Section 263.

Conclusion:
The Tribunal quashed the CIT's order u/s 263, holding that the CIT did not provide a clear finding of any error in the AO's assessment order. The Tribunal observed that the assessee had provided all relevant details and documents during the assessment proceedings, and the AO had not found any discrepancies. The Tribunal emphasized that the CIT cannot invoke jurisdiction u/s 263 without bringing material on record to show that the AO's order was erroneous and prejudicial to the interests of the revenue. Consequently, the appeal of the assessee was allowed.