2022 (10) TMI 985 - AT - Income Tax

Revision u/s 263 by CIT - As per CIT, claim of deduction of expenses with respect to the purchase, expenses, brokerage or interest is not in accordance with the law - AO has not verified the Sundry Creditors, other expenses, brokerage paid and unsecured loan - HELD THAT - We find that the Assessing Officer has called for all the information required for making assessment, have perused the relevant details filed by the assessee, wherever the details are not coming forth the requisite penalty notices were issued and the balance information was obtained and verified. PCIT has also called for the report of the learned Assessing Officer where AO has also shown that requisite notices under Section 133(6) of the Act were issued and replies were obtained from lenders. It is not the case of the learned PCIT that the AO has allowed the claim of the assessee or not made addition/ disallowances, which should have been made as per law. Only reason for holding the order of AO erroneous is that interest was not examined if same were utilized for the purpose of the business, the expenses were correct or genuine and whether for brokerage expenses services were rendered or not. PCIT did not find single instances despite having all the information available with him, which is even remotely suggesting and supporting the reasons for which order under Section 263 of the Act was passed. If the order has been passed without making enquiries or verification which are reasonable and prudent officer should have carried out, in that case no doubt the order passed by the learned Assessing Officer becomes erroneous. However, the learned PCIT should have shown that what are the further enquiries or verification should have been made by AO which he has failed to do. The revisionary authority should be in a position to show that failure to make the enquiry in a particular fashion, which should have been made by the man of reasonable prudence, and learned Assessing Officer has failed to do so. This could have been shown by also looking at the past assessment history of the assessee. In fact the assessee has shown that in earlier assessment year passed under scrutiny assessment did not result into any addition. There is nothing in the revisionary order to show that the claim of deduction of expenses with respect to the purchase, expenses, brokerage or interest is not in accordance with the law. Also not shown that fresh loans taken by the assessee and he has failed to discharge initial onus. In the result, we do not find that the assessment order passed by the learned Assessing Officer is erroneous so far as it is prejudicial to the interest of the Revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the revisionary order under Section 263 of the Income-tax Act, 1961.
2. Verification of Sundry Creditors, other expenses, brokerage paid, and unsecured loans.
3. Direction for fresh assessment by the Assessing Officer.

Detailed Analysis:

Issue 1: Validity of the Revisionary Order under Section 263
The primary issue in the appeal is the validity of the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income-tax Act, 1961. The PCIT held that the assessment order dated 10th December 2019, under Section 143(3), was erroneous and prejudicial to the interest of the Revenue. The assessee argued that the order passed by the Assessing Officer (AO) was not erroneous as all necessary verifications and examinations were conducted during the assessment proceedings. The Tribunal observed that the AO had indeed verified the details of loans, interest paid, sundry creditors, and other expenses, and had issued notices under Section 133(6) to relevant parties. The Tribunal found that the PCIT did not provide any specific instance where the AO failed to make necessary inquiries. Consequently, the Tribunal held that the revisionary order under Section 263 was not sustainable and quashed it.

Issue 2: Verification of Sundry Creditors, Other Expenses, Brokerage Paid, and Unsecured Loans
The PCIT's revisionary order questioned the AO's verification of sundry creditors amounting to Rs. 9.35 crores, other expenses of Rs. 79.53 lakhs, brokerage paid of Rs. 1.36 crores, and unsecured loans of Rs. 7.45 crores. The Tribunal noted that the AO had asked for detailed information regarding these items during the assessment proceedings. The assessee provided confirmation letters, income tax returns, and other relevant documents to support the claims. The Tribunal found that the AO had made reasonable inquiries and had verified the details provided by the assessee. The PCIT's contention that the AO failed to examine the correctness and genuineness of these claims was not supported by any specific evidence. Therefore, the Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue.

Issue 3: Direction for Fresh Assessment by the AO
The PCIT directed the AO to make a fresh assessment without limiting it to the issues considered in the Section 263 proceedings. The assessee argued that this direction was beyond the scope of the revisionary proceedings. The Tribunal agreed with the assessee, stating that the AO had already verified the details during the original assessment proceedings. The Tribunal emphasized that the PCIT did not provide any substantial reason to justify a fresh assessment. As a result, the Tribunal held that the direction for a fresh assessment was not warranted and quashed the PCIT's order.

Conclusion
The Tribunal quashed the revisionary order passed by the PCIT under Section 263 of the Income-tax Act, 1961, holding that the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal found that the AO had made reasonable inquiries and verified the necessary details during the assessment proceedings. Consequently, the appeal of the assessee was allowed.