2018 (8) TMI 710 - AT - Income Tax

Revision u/s 263 - Additions on the basis of printouts taken from the laptop - laptop was recovered from part time accountant - CIT observed that AO has not examined certain issues properly at the time of making the assessment - Held that - since the issues under consideration was not related to assessment year in question but were related to earlier years, CIT the Ld.Pr.CIT is not permitted to invoke jurisdiction u/s 263 for examination of the issues. Further, where assessing authority had already considered all details mentioned in computation statement which was taken from books of account maintained by assessee, revision was not justified. Additions on the basis of printouts taken from the laptop - The assessee denied ownership of the extracts taken from the laptop stating that the laptop does not belong to their firm at the time of survey itself. - Held that - The fact that the laptop does not belong to the assessee was not disputed by the AO. The contention of the assessee that the part time accountant maintained the books of accounts of many other customers was also not disputed. During the assessment proceedings, the assessee stated that the assessee has not maintained books of accounts and admitted the income as per section 44AF of the Act. The AO has not brought on record any material to establish that the turnover recorded in the computer extract belonged to the assessee. Since the department has failed to bring any evidence to hold that the printouts of computer related to the business of the assessee, we are unable to uphold the order of the Ld.Pr.CIT on this issue. Regarding non-examination of issues by the AO - the responsibility cast upon the Ld.Pr.CIT to establish that the issues were not examined by the AO. Mere non mentioning or not recording the findings in the assessment order, does not establish that the AO has not examined the issues especially when the material is available to the AO at the time of assessment. Therefore, we hold that assessment order passed by AO is neither erroneous nor prejudicial to the interest of the revenue. Hence, we set aside the order of the Ld.Pr.CIT and allow the appeal of the assesse

Summary

Issues Involved:
1. Delay in filing appeals.
2. Reopening of assessment and discrepancies found during the survey.
3. Purchase of property and unexplained investment.
4. Repayment of bank loan and sources of funds.
5. Probable undisclosed income.
6. Printouts from the accountant's laptop.
7. Inventory of physical stock.
8. Cost of construction and related expenses.
9. Overdraft facility and bank transactions.

Issue-wise Detailed Analysis:

1. Delay in Filing Appeals:
The appeals were delayed by 255 days. The assessees filed affidavits citing inadvertent mistakes by their tax consultant and lack of awareness of legal consequences as reasons for the delay. The tribunal, considering the merits of the case and in the interest of justice, condoned the delay and admitted the appeals.

2. Reopening of Assessment and Discrepancies Found During the Survey:
A survey under section 133A was conducted, revealing discrepancies. The assessee's case was reopened under section 148, and the assessment was completed under section 143(3) read with section 147. The Pr.CIT found that the Assessing Officer (AO) had not examined certain issues properly, leading to the revision of the assessment order under section 263.

3. Purchase of Property and Unexplained Investment:
The Pr.CIT noted that the assessee purchased a house for ?45,50,000/- against an SRO value of ?59,60,000/-. The AO did not properly examine the sources of funds for this purchase. The assessee argued that the purchase was scrutinized in the assessment year 2007-08, and the sources were explained and accepted by the AO. The tribunal held that the issue was irrelevant for the assessment year 2010-11, and thus, there was no case for revision under section 263.

4. Repayment of Bank Loan and Sources of Funds:
The Pr.CIT raised concerns about the repayment of a loan from REPCO Bank. The assessee furnished details of the loan and its repayment during the reassessment proceedings. The tribunal found that the AO had verified these details and accepted the sources as genuine. Therefore, reexamination would amount to a difference of opinion, not an error justifying revision under section 263.

5. Probable Undisclosed Income:
The Pr.CIT estimated probable undisclosed income for various assessment years based on survey findings. The assessee contended that these were hypothetical figures without evidence. The tribunal noted that the Pr.CIT's estimation lacked a factual basis and was speculative. Thus, it could not be a ground for revision under section 263.

6. Printouts from the Accountant's Laptop:
Printouts from a laptop, allegedly belonging to the assessee's part-time accountant, were taken during the survey. The assessee denied ownership of the laptop and its contents. The tribunal observed that the AO did not establish a connection between the printouts and the assessee's business. The tribunal held that the revision under section 263 could not be based on unverified printouts.

7. Inventory of Physical Stock:
The Pr.CIT noted discrepancies in the inventory of physical stock taken during the survey. The assessee claimed that the AO reconciled the stock with VAT returns and other records. The tribunal found that the AO had accepted the assessee's income under section 44AF, making the stock reconciliation irrelevant for revision under section 263.

8. Cost of Construction and Related Expenses:
The Pr.CIT questioned the cost of constructing a building and the sources of funds. The assessee provided details of the construction costs and sources during the assessment. The tribunal held that the AO had examined these details, and the Pr.CIT's concerns amounted to inadequate inquiry, not lack of inquiry. Thus, it was not a valid ground for revision under section 263.

9. Overdraft Facility and Bank Transactions:
The Pr.CIT raised issues regarding an overdraft facility and bank transactions. The assessee explained that the deposits were from current year sales, and the AO had verified this during the assessment. The tribunal found no basis for revision under section 263, as the AO had examined the relevant details.

Conclusion:
The tribunal found that the Pr.CIT's order under section 263 was based on inadequate inquiry rather than lack of inquiry. The AO had examined the relevant issues during the assessment, and the Pr.CIT's concerns were speculative or based on differences of opinion. Therefore, the tribunal set aside the Pr.CIT's order and restored the AO's assessment order, allowing the appeals of the assessees for the assessment years 2010-11 and 2011-12.