9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (10) TMI 972 - AT - Income TaxRevision u/s 263 by CIT - Reopening of assessment u/s 147 - assessee firm had allegedly received bogus entries - lack of inquiry v/s inadequate inquiry - whether the Ld. PCIT was justified in exercising his revisionary powers u/s. 263 when the AO had already rejected the various contentions of the assessee and had also made additions to the returned income by disallowing salary and interest to partners and had also enhanced the percentage of earnings by taking the same as 8% being commission earned by the assessee firm? - HELD THAT - As in the present case, the Ld. PCIT has not specifically pointed out as to what inquiries or verification should have been carried out by the AO in this regard. From the records produced before us, it is very much evident that the AO had made inquiries regarding assessee's claim of having earned income from sub-contract work and, thereafter, after considering the reply submitted by the assessee, the AO reached a conclusion that the assessee's claim regarding its working as a sub-contractor was not to be accepted and that the assessee's such claim was to be rejected. Thereafter, the AO proceeded to hold that the assessee's work was in the nature of providing accommodation entries and based on this conclusion, the AO held that a rate of 8% should be applied being percentage of commission earned on providing the accommodation entries. Thus, in view of the questionnaires issued by the AO and the replies submitted by the assessee, the conclusion reached by the AO of rejecting the assessee's claim apparently proves that the AO had made proper inquiries and had also duly applied his mind to the facts of the case. Therefore, the contention of the Ld. PCIT that no enquiry was made by the AO is factually incorrect. It is not a case, where no inquiry had been made by the AO. Merely because the Ld. PCIT felt that further inquiry should have been made does not make the order of the AO erroneous and prejudicial to the interest of the Revenue. We also note that there is no incorrect application of law by the AO in the present case and further, the AO, after making inquiries and examining the records, has taken a view which is one of the possible views, and since this view is not unsustainable in law, it cannot be said that the order passed by the AO was erroneous in so far as being prejudicial to the interest of Revenue. Even at the cost of repetition, we reiterate that inadequacy of inquiry does not give jurisdiction to the Ld. PCIT to invoke his revisionary powers and set aside the assessment and nor does this section provide such powers to the Ld. PCIT that he can impose his view on the AO dictating him how a particular assessment is to be concluded. Pr.CIT has ignored the replies of the assessee and he has not discussed as to why he does not agree with the contentions of the assessee. The Ld. Pr.CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr.CIT although it was incumbent upon him to make such inquiry so as to reach the conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. There is a difference between lack of inquiry and inadequate inquiry and it is for the Assessing Officer to decide the extent of inquiry to be made and it is his satisfaction which is required under the law. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Sunbeam Auto Ltd. 2009 (9) TMI 633 - DELHI HIGH COURT has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s. 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr.CIT cannot pass the order u/s. 263 on the ground that thorough inquiry should have been made by the Assessing Officer. We have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s. 263 of the Act and we have no option but to quash the same. It is so ordered accordingly. - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of the assessment order passed by the AO. 2. Justification for invoking revisionary powers under section 263 by the Ld. PCIT. 3. Adequacy of inquiries conducted by the AO. 4. Application of Explanation 2 to section 263 of the Act. Detailed Analysis: 1. Legitimacy of the Assessment Order Passed by the AO: The AO reopened the case based on information from a search on M/s. S.P. Singla Group, which indicated that the assessee firm was used to book bogus expenses. The AO issued a notice under section 148, and the assessee filed a return of income under section 44AD. The AO concluded that the assessee firm had not undertaken any business activity and had provided accommodation entries to S.P. Singla Group, earning commission income. The AO calculated the commission income at 8% of the gross receipts and disallowed deductions for salary and interest to partners due to the absence of a certified partnership deed. 2. Justification for Invoking Revisionary Powers under Section 263 by the Ld. PCIT: The Ld. PCIT issued a Show Cause Notice under section 263, stating that the AO failed to verify/enquire essential facts and should have taxed the entire gross receipts as commission income. The Ld. PCIT held that the AO's order was erroneous and prejudicial to the interests of the Revenue, directing the AO to make a fresh assessment. 3. Adequacy of Inquiries Conducted by the AO: The Tribunal noted that the AO had issued detailed questionnaires and the assessee had responded with work contracts and other relevant information. The AO rejected the assessee's claim of being a sub-contractor and concluded that the assessee provided accommodation entries, applying an 8% commission rate. The Tribunal found that the AO had made proper inquiries and applied his mind to the facts, thus the AO's order was neither erroneous nor prejudicial to the Revenue. 4. Application of Explanation 2 to Section 263 of the Act: The Tribunal highlighted that Explanation 2 to section 263 deems an order erroneous if passed without necessary inquiries or verification. However, the Ld. PCIT did not specify what further inquiries should have been conducted. The Tribunal emphasized that inadequacy of inquiry does not justify invoking section 263, and the Ld. PCIT cannot impose his view on the AO. The Tribunal also noted that the Ld. PCIT did not conduct any independent inquiries to substantiate his conclusion. Conclusion: The Tribunal quashed the Ld. PCIT's order, stating that the AO had conducted adequate inquiries and the assessment order was not erroneous or prejudicial to the Revenue. The Tribunal reiterated that the Ld. PCIT cannot invoke section 263 merely due to a difference in opinion on the extent of inquiry. The appeals of the assessees were allowed, and the orders under section 263 were set aside.
|
