2022 (9) TMI 285 - AT - Income Tax

Revision u/s 263 by CIT - As per CIT there was decrease in value of trade but there was no corresponding sale of trade items to this effect - HELD THAT - During the course of proceeding u/s. 263 before the PCIT the assessee failed to file any evidence to support/substantiate the claim of reduced value of closing stock. Perusal of assessment order reveals that no such issue came for consideration before the AO. The assessee refrained from appearing and has not filed any details about the questionnaire issued by the ld.AO and whether any such information was called for by the AO regarding the issue raised/referred in show cause notice u/s. 263. We are unable to find any such documents on record, which could show that this issue of decrease in closing stock came up before ld.AO at any point of time. It is a matter of claiming loss towards trading business and without complete evidence such loss claimed by the assessee cannot be allowed. PCIT has rightly observed/held that the order of the AO u/s. 143(3) of the Act is erroneous and prejudicial to the interest of the revenue. No infirmity in the impugned order passed u/s. 263 of the Act setting aside the assessment order and directing the ld.AO to frame the assessment afresh after considering the observations/findings of the ld.PCIT. PCIT has rightly invoked jurisdiction u/s. 263 of the Act to setting aside the impugned assessment order passed u/s. 143(3) - Decided against assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Invocation of jurisdiction under Section 263 of the Income Tax Act, 1961.
3. Assessment based on decrease in value of stock without corresponding sales.

Condonation of Delay in Filing the Appeal:
The appeal was found to be time-barred by 345 days, with the assessee seeking condonation of the delay. The reasons provided included the mental distress of the consultant due to the sudden death of his son, financial crisis faced by the company, and the consultant's oversight due to mental disturbance. The Tribunal, after reviewing the condonation application and considering the circumstances, condoned the delay and admitted the appeal for adjudication.

Invocation of Jurisdiction under Section 263:
The Principal Commissioner of Income Tax invoked revisionary power under Section 263 of the Act based on a decrease in the value of trade without corresponding sales, leading to a lower closing stock balance. The assessee claimed this decrease as a loss but failed to provide sufficient evidence to substantiate the claim during the proceedings. The Principal Commissioner held the assessment order to be erroneous and prejudicial to the revenue's interest, directing a fresh assessment. The Tribunal upheld the Principal Commissioner's decision, stating that without complete evidence, the claimed loss cannot be allowed. The invocation of jurisdiction under Section 263 was deemed appropriate, and the appeal challenging this decision was dismissed.

Assessment Based on Decrease in Value of Stock without Corresponding Sales:
The assessee, a trading company, declared nil income for the assessment year 2013-14. The Assessing Officer made certain additions and disallowances, resulting in an assessed loss. The Principal Commissioner observed a decrease in the value of stock without corresponding sales, leading to an under-assessment of income. The Tribunal noted that the issue of decreased closing stock value was not raised before the Assessing Officer, and the assessee failed to provide evidence to support the claim during the revisionary proceedings. Consequently, the Tribunal upheld the Principal Commissioner's decision to set aside the assessment order and direct a fresh assessment considering the observations made.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the Principal Commissioner's decision to invoke jurisdiction under Section 263 and set aside the assessment order due to the decrease in stock value without corresponding sales. The Tribunal found the delay in filing the appeal justified and admitted it for adjudication, while emphasizing the importance of providing complete evidence to support claims during assessment proceedings.