2022 (4) TMI 1013 - AT - Income Tax

Revision u/s 263 - CIT initiating proceedings on the basis of audit objection - reopening of assessment u/s 147 - though the assessee as per information gathered by the Assessing officer had carried out cash transactions and was in receipt of contract payments, however, he had failed to file his return of income for the year under consideration - HELD THAT - As facts reveals beyond doubt that the AO had in the course of the assessment proceedings applied his mind as regards the reasons on the basis of which the case of the assessee was reopened by him and, had only after finding the claim/explanation of the assessee in order and to his satisfaction accepted the same. As observed by us, AO had duly verified the aforesaid claim of the assessee that his contract receipts/turnover qua the contractor, viz. M/s. Shafi Ahmed and had only after vetting the said claim on the basis of the latter's confirmations that were placed on his record and the bank statements of the assessee which duly supported his aforesaid claim, had accepted the same. Cash transaction which, inter alia, had formed one of the reason for reopening of the assessee's case, we find that the AO after duly verifying the bank statements of the assessee, had concluded that there were no such transactions carried out by the assessee during the year under consideration. We are unable to persuade ourselves to subscribe to the view taken by the Pr. CIT that the Assessing Officer had summarily accepted the claim of the assessee on the aforesaid issue in question. In our considered view, as the Assessing Officer while framing assessment vide his order passed u/s. 147 r.w.s. 143(3) had carried out necessary verifications, the same, even if are to be held to be inadequate would by no means justify the invoking of the revisional jurisdiction by the Pr. CIT u/s. 263 - On the basis of our aforesaid deliberations, we are unable to concur with the view taken by the Pr. CIT that de hors necessary verifications on the part of the AO as regards the reasons on the basis of which the case of the assessee was reopened u/s. 147 of the Act, his order passed u/s. 147 r.w.s. 143(3) of the Act was rendered as erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Explanation-2 to Section 263 - Appeal of assessee allowed.

Summary

Issues:
1. Validity of proceedings initiated under Section 263 of the Income-tax Act, 1961 based on audit objection.
2. Failure of the Principal Commissioner of Income-tax to consider the appellant's reply before setting aside proceedings.
3. Setting aside the assessment order and remanding it back to the Assessing Officer for fresh adjudication.
4. Allegations of arbitrariness and illegality in the impugned order.
5. Assessment of income for the year 2015-16 based on cash transactions and contract receipts.

Analysis:

1. The appeal challenged the order passed by the Principal Commissioner of Income Tax under Section 263 of the Income-tax Act, 1961, based on the initiation of proceedings due to audit objections. The appellant contended that the initiation of proceedings was illegal and lacked jurisdiction. The Tribunal examined the grounds of appeal and found that the Assessing Officer reopened the case under Section 147 of the Act due to unfiled income tax return despite cash transactions and contract receipts. The appellant declared an income of ?5,77,934 for the assessment year 2015-16.

2. The appellant further argued that the Principal Commissioner of Income-tax erred in not considering the appellant's reply filed online before setting aside the proceedings. The Tribunal noted the failure to consider the appellant's response and evaluated the impact of this omission on the validity of the proceedings.

3. The issue of setting aside the assessment order and remanding it back to the Assessing Officer for fresh adjudication was also raised. The Tribunal reviewed the actions of the Principal Commissioner of Income-tax in this regard and assessed whether the decision to remand the assessment order was justified based on the facts and circumstances of the case.

4. Allegations of arbitrariness and illegality in the impugned order were addressed by the Tribunal. The appellant claimed that the impugned order was arbitrary and bad in law. The Tribunal analyzed the grounds for these allegations and determined the validity of such claims in the context of the legal provisions and precedents.

5. The core issue revolved around the assessment of income for the year 2015-16 based on cash transactions and contract receipts. The Tribunal examined the details of the cash transactions and contract receipts provided by the appellant, along with the Assessing Officer's findings. The Tribunal assessed whether the Assessing Officer had conducted thorough verifications and whether the order passed under Section 147 r.w.s. 143(3) of the Act was erroneous or prejudicial to the revenue's interest.

In conclusion, the Tribunal allowed the appeal, setting aside the order passed by the Principal Commissioner of Income-tax under Section 263 of the Act and restoring the order of the Assessing Officer passed under Section 147 r.w.s. 143(3) of the Act for the assessment year 2015-16.