2020 (12) TMI 468 - AT - Income Tax

Revision u/s 263 - AO had not carried out any enquiry to verify three issues unsecured loan, rent paid to M/s. Kwality Confronts Pvt Ltd. and professional fees paid in excess of ₹ 20,000/- and that the submissions made by the assessee had been accepted by the AO without verification and proper enquiry - HELD THAT - As regards to loan of ₹ 10,00,000/-, the ld Pr. CIT has observed that the assessee has failed to furnish the necessary details regarding the creditworthiness of the loan creditor and, the AO has overlooked this aspect while completing the assessment. From the ledger copy furnished by the assessee in its book, we observe that the assessee has shown closing balance of ₹ 10,00,000/- as on 31.3.2013, meaning thereby that the entire loan of ₹ 10,00,000/- has been refunded to the loan creditor. When the loan receiving and repaying is reflected in the assessee s book, the transaction between the assessee and loan creditor is proved. Hence, it cannot be said the AO has not enquired the matter. As regards to security deposit of ₹ 80,000/- and professional fees of ₹ 2,35,000/- towards cash payment, we observe that the AO has not made proper enquiry into the matter and, therefore, the Pr. CIT is justified in directing the AO to revise the assessment order. This omission by the AO tagged the impugned assessment order as erroneous and prejudicial to the interest of the revenue. Since the assessment has already been set aside and the AO has been directed by the ld PCIT to re-frame it afresh after giving opportunity to the Assessee and after considering assessee s explanation and all relevant material in accordance with law, therefore, we agree with the CIT and in our opinion, no interference is called for in the order of ld Pr. CIT. We dismiss the appeal filed by the assessee by upholding the order passed u/s 263. However, we may note that while passing the fresh assessment order, the AO should take into consideration the repayment of loan of ₹ 10,00,000/- by the assessee to the loan creditor, as is reflected in the ledger copy furnished by the assessee. Regarding other two addition, the AO will enquiry into the matter and pass order accordingly.

Summary

Issues:
Appeal against order u/s.263 for AY 2013-14.

Detailed Analysis:

1. Delay Condonation:
The appeal was filed 6 days beyond the deadline. The Tribunal, citing a precedent, condoned the delay as the assessee had a valid reason and admitted the appeal for adjudication.

2. Grounds Raised by Assessee:
The assessee challenged the order as arbitrary and illegal, arguing that the AO had conducted inquiries and allowed claims without discussing them in the assessment order. The Pr. CIT sought to reframe the assessment, leading to the dispute.

3. Discrepancies in Assessment Order:
The PCIT identified discrepancies in the assessment order related to unsecured loans, rent payments, and professional fees. The PCIT found faults in the AO's handling of these issues and directed a reexamination.

4. Assessee's Defense:
The assessee argued that the AO had made sufficient inquiries during assessment proceedings and had considered all relevant materials. The distinction between lack of inquiry and inadequate inquiry was emphasized to challenge the PCIT's decision.

5. PCIT's Action Upheld:
The Tribunal reviewed the PCIT's findings and upheld the decision, noting that while the loan repayment was adequately verified by the AO, other issues like security deposits and professional fees lacked proper inquiry. The PCIT's directive for a fresh assessment was deemed justified.

6. Final Decision:
The appeal was dismissed, affirming the PCIT's order under section 263. The Tribunal instructed the AO to consider the loan repayment in the fresh assessment and thoroughly investigate the remaining issues. The assessee was granted the liberty to provide explanations to the AO on the reinstated issues.

In conclusion, the Tribunal upheld the PCIT's decision under section 263, emphasizing the importance of thorough inquiry and proper assessment procedures to ensure accuracy and fairness in tax matters.