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2019 (12) TMI 913 - AT - Income TaxRevision u/s 263 - assessment was completed u/s. 143(3) - HELD THAT - The way in which assessment should be finalized falls in the exclusive domain of the AO. Section 142(1) speaks of inquiry before assessment and gives immense power to the A.O. for conducting enquiry. Therefore, the A.O. u/s 142(1)(ii) (iii) can ask the assessee almost any information which he think necessary for passing assessment order. The assessing officer has conducted a detailed scrutiny and thorough enquiry in respect of capital introduced and labour charges. After going through the information furnished by assessee, we note that it is not a case of inadequate scrutiny as noted by the ld CIT in his order u/s 263 of the Act. Thorough examinations of the details and documents and explanations submitted by the A.R. of the assessee (in respect of labour charges and capital introduced), as per requisitions sought by the A.O. and as deemed fit for computing the true taxable income, the assessment was completed u/s. 143(3) of the Act, therefore, it is not a case of inadequate scrutiny hence the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue, therefore, we quash the order passed by ld PCIT under section 263 of the Act.
Issues Involved:
1. Whether the order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the Revenue. 2. Whether the AO conducted sufficient inquiry regarding the genuineness of labour charges and the introduction of capital by one of the partners. Detailed Analysis: 1. Erroneous and Prejudicial Order: The Principal Commissioner of Income Tax (PCIT) exercised jurisdiction under section 263 of the Income Tax Act, 1961, and found the AO's order for the Assessment Year 2014-15 to be erroneous and prejudicial to the interest of the Revenue. The PCIT identified two main issues: the claim of labour charges amounting to ?26,25,000 and the introduction of capital by a partner amounting to ?16,57,666. The PCIT noted that these aspects were not adequately verified by the AO, leading to the issuance of a notice under section 263. 2. Inquiry into Labour Charges and Capital Introduction: The assessee contended that all relevant documents were provided during the assessment proceedings, and the AO conducted ten hearings, examining the details of labour charges and the capital introduced by the partner. The PCIT, however, rejected this contention and directed the AO to make fresh assessments and verify the genuineness of the labour charges and the capital introduction. 3. Jurisdiction and Adequacy of Inquiry: The Tribunal examined whether the PCIT had the requisite jurisdiction to exercise revisional powers under section 263. It referred to the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which established that the AO's order must be both erroneous and prejudicial to the Revenue's interest for section 263 to apply. The Tribunal noted that the AO conducted ten hearings and issued statutory notices, during which the assessee furnished all required details, including those related to labour charges and capital introduction. The AO's detailed scrutiny and verification process indicated that the inquiry was neither inadequate nor conducted in haste. 4. AO's Discretion and Judicial Precedents: The Tribunal emphasized that the AO has the discretion to decide the extent and depth of inquiries during assessment. It cited the decision in Smt. Juthika Kar vs. ITO, which held that the conclusions drawn by the AO after adequate inquiry cannot be subjected to revision merely because the PCIT disagrees with those conclusions. The Tribunal found that the AO's inquiry into the labour charges and capital introduction was thorough and based on sufficient evidence, thus not erroneous or prejudicial to the Revenue. Conclusion: The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the Revenue's interest. It quashed the PCIT's order under section 263, allowing the assessee's appeal. The Tribunal reiterated that the AO conducted a detailed scrutiny and inquiry, satisfying the requirements of section 142(1) and ensuring that the assessment was made based on a thorough verification of all relevant aspects.
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