2018 (4) TMI 393 - AT - Income Tax

Revision u/s 263 - addition of various expenses - Held that - Assessing Officer has taken into consideration the material before him and after due application of law and of facts and then reached at the conclusion to conclude the assessment U/s 143(3) of the Act. It was not a case where Assessing Officer completed the assessment without conducting necessary and proper enquiries. The issue raised by the ld. Pr.CIT has been considered by the Assessing Officer at the time of assessment and the assessee has submitted evidences and details in support of its claim made in P&L account. Therefore, in our considered view, the order passed by the Assessing Officer U/s 143(3) of the Act on 24/3/2014 was not an erroneous order, which could be said to be prejudicial to the interest of the revenue - Decided in favour of assessee.

Issues Involved:
1. Legality of the order passed under Section 263 of the Income Tax Act, 1961.
2. Examination of remuneration to working partners.
3. Declaration of profits/income from providing L&T and JCB machines.
4. Claim of late fee charges.
5. Nature of contract work agreements.
6. Details pertaining to capital introduced by partners.
7. Verification of freight payments and TDS liability under Section 194C.
8. Inquiry into the identity, genuineness, and creditworthiness of unsecured loans.

Issue-wise Detailed Analysis:

1. Legality of the order passed under Section 263 of the Income Tax Act, 1961:
The primary issue was whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking Section 263 to revise the assessment order passed under Section 143(3). The assessee argued that the Assessing Officer (AO) had conducted proper inquiries and verifications during the assessment proceedings. The Tribunal observed that the AO had indeed made necessary inquiries and verifications, and the assessment order was passed after due consideration of all relevant details. The Tribunal concluded that the AO’s order was neither erroneous nor prejudicial to the interest of the revenue, thereby quashing the Pr. CIT’s order under Section 263.

2. Examination of remuneration to working partners:
The Pr. CIT directed the AO to re-examine the computation of remuneration to the working partners, noting discrepancies in the audit report, P&L account, and computation of total income. The assessee contended that the remuneration was in accordance with the partnership deed and had been correctly claimed. The Tribunal found that the AO had already scrutinized the remuneration details during the assessment, and any discrepancies were minor and did not affect the total income. Thus, the Tribunal held that the AO’s order on this issue was not erroneous.

3. Declaration of profits/income from providing L&T and JCB machines:
The Pr. CIT questioned the declaration of income from L&T and JCB machines, alleging that the assessee did not own such machines. The assessee clarified that it did not own JCB or crane machines and only incurred expenses for their use. The Tribunal noted that the AO had examined the expenses and made disallowances where necessary. Therefore, the AO’s order was not erroneous or prejudicial to the revenue on this issue.

4. Claim of late fee charges:
The Pr. CIT directed the AO to examine the nature of late fee charges claimed by the assessee. The assessee explained that the charges were late fees levied by the Mining Department for delayed royalty payments. The Tribunal observed that the AO had verified these charges during the assessment and allowed them after being satisfied with the explanation. Hence, the AO’s order was not erroneous in this regard.

5. Nature of contract work agreements:
The Pr. CIT questioned the AO’s examination of the contract work agreements executed by the assessee. The assessee submitted that the contract was for royalty collection awarded by the Mining Department, and all relevant details were provided to the AO. The Tribunal found that the AO had scrutinized the contract details and concluded the assessment accordingly. Therefore, the AO’s order was not erroneous or prejudicial to the revenue on this issue.

6. Details pertaining to capital introduced by partners:
The Pr. CIT directed the AO to verify the capital introduced by the partners. The assessee argued that the capital contributions were explained with supporting documents, including income tax returns and balance sheets of the partners. The Tribunal noted that the AO had examined these details during the assessment and accepted the capital contributions. Thus, the AO’s order was not erroneous on this issue.

7. Verification of freight payments and TDS liability under Section 194C:
The Pr. CIT questioned the AO’s verification of freight payments concerning TDS liability. The assessee contended that all necessary details were provided, and no TDS was required as no payment exceeded the threshold limit. The Tribunal observed that the AO had verified the freight payments and found no discrepancies. Therefore, the AO’s order was not erroneous in this regard.

8. Inquiry into the identity, genuineness, and creditworthiness of unsecured loans:
The Pr. CIT directed the AO to inquire into the unsecured loans taken by the assessee. The assessee submitted that all loan details, including confirmations and income tax returns of the lenders, were provided during the assessment. The Tribunal found that the AO had examined these details and accepted the loans as genuine. Hence, the AO’s order was not erroneous on this issue.

Conclusion:
The Tribunal concluded that the AO had conducted proper inquiries and verifications during the assessment proceedings. The assessment order was neither erroneous nor prejudicial to the interest of the revenue. Therefore, the Tribunal set aside the Pr. CIT’s order passed under Section 263 and allowed the assessee’s appeal.

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