2022 (6) TMI 965 - AT - Income Tax

Revision u/s 263 - PCIT setting aside the assessment order on the issue of applicability of provisions of section 14A, examination of unsecured loan taken by the company,examination of TDS claim,examination of interest income earned, examination of depreciation claim on lease hold assets of the company,examination of expenses on corporate social responsibility incurred and directing the assessing officer for re-examination of the same - HELD THAT - A perusal of above finding of the Ld. PCIT and also considering the judicial precedence referred therein, we find that neither any details were filed during the course of revisionary proceedings before the Ld. PCIT nor any details were filed before this Tribunal. There is no discussion on the alleged issues referred to show cause notice in the assessment order. All these facts indicate that the issues raised by the Ld. PCIT in the show cause notice giving rise to revisionary proceedings has not been examined by the Ld. AO and the same needs to be examined as per direction given by the Ld.PCIT in the impugned order. We, therefore, find no reason to interfere in the finding of the Ld. PCIT given in the impugned order passed u/s. 263 of the Act. Accordingly, all the grounds raised by the assessee are dismissed and revisionary proceedings u/s. 263 of the Act are held to be valid and hold that the Ld. PCIT has rightly invoked the jurisdiction and carried out the revisionary proceedings u/s. 263 - Decided against assessee.

Issues Involved:
1. Validity of notice issued under Section 263 of the Income Tax Act, 1961.
2. Validity of the order passed under Section 263 of the Income Tax Act, 1961.
3. Applicability of provisions of Section 14A of the Income Tax Act, 1961.
4. Examination of unsecured loans.
5. Examination of TDS claims.
6. Examination of interest income.
7. Examination of depreciation claims on leasehold assets.
8. Examination of expenses on corporate social responsibility.
9. Adequacy of examination and analysis by the assessing officer.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued Under Section 263 of the Income Tax Act, 1961:
The appellant argued that the notice dated 19th December 2017, issued by the learned Pr. Commissioner of Income Tax (Pr. CIT), Kolkata-4, under Section 263 of the Income Tax Act, 1961, was "bad in law, void ab initio and liable to be quashed." However, the tribunal found that the notice was issued correctly as the issues raised were not adequately examined by the assessing officer (AO).

2. Validity of the Order Passed Under Section 263 of the Income Tax Act, 1961:
Similarly, the appellant contended that the order dated 15th February 2018, passed by the Pr. CIT under Section 263, was "bad in law, void ab initio and liable to be cancelled." The tribunal upheld the validity of the order, stating that the Pr. CIT had rightly invoked jurisdiction under Section 263 due to inadequate examination of critical issues by the AO.

3. Applicability of Provisions of Section 14A of the Income Tax Act, 1961:
The tribunal noted that the applicability of Section 14A was not explored during the assessment. The Pr. CIT pointed out that the AO did not examine whether expenses claimed under Section 14A were justified, making the assessment order erroneous and prejudicial to the interest of the revenue.

4. Examination of Unsecured Loans:
The tribunal observed that the AO failed to scrutinize the unsecured loans properly. Comments from the auditors indicated squared-up loans to and from closely held companies, which were not adequately examined.

5. Examination of TDS Claims:
The tribunal found discrepancies in the TDS claims. There were two sets of total TDS deducted, which were not reconciled during the assessment, making the order erroneous and prejudicial to the interest of the revenue.

6. Examination of Interest Income:
The tribunal noted that the AO did not adequately examine the segregation of pre-production interest income into capitalized and charged amounts. The Pr. CIT pointed out that the AO failed to seek justification for this segregation, making the order erroneous.

7. Examination of Depreciation Claims on Leasehold Assets:
The tribunal found that the AO accepted the claim of depreciation on leasehold assets without verifying the existence of such assets in the books. This lack of inquiry made the assessment order erroneous and prejudicial to the interest of the revenue.

8. Examination of Expenses on Corporate Social Responsibility:
The tribunal observed that the AO allowed the claim for expenses under "Corporate Social Responsibility" without examining their nature and genuineness, making the assessment order erroneous.

9. Adequacy of Examination and Analysis by the Assessing Officer:
The tribunal concluded that the AO failed to make requisite inquiries and adequately verify the issues raised, resulting in an erroneous and prejudicial order to the interest of the revenue. The tribunal cited several judicial precedents, emphasizing that an AO must conduct a thorough and adequate investigation.

Conclusion:
The tribunal upheld the order of the Pr. CIT under Section 263 of the Income Tax Act, 1961, and dismissed the appeal of the assessee. The tribunal found that the AO's assessment was erroneous and prejudicial to the interest of the revenue due to inadequate examination and verification of critical issues. The AO was directed to re-examine the specific points mentioned and provide the assessee with an opportunity to produce relevant documents and evidence. The tribunal's decision was pronounced in the open court on 13th June 2022.

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